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Informist, Tuesday, Apr. 7, 2026

By Durgesh Nandan

MUMBAI – The interbank call money rate for one-day loans ended slightly lower from Monday's closing level due to ample liquidity surplus in the banking system. The call rate also ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to weak demand for funds from banks, dealers said.

The one-day call rate ended at 4.70% Tuesday, down from 4.75% for one-day loans Monday. The weighted average call rate was 5.09%, marginally higher from 5.08% Monday. The tri-party repo rate closed at 5.03%, similar to 5.00% Monday. The weighted average rate in the tri-party repo market was 4.83%, up from 4.78% in the previous session. The volume in the tri-party repo market was INR 3.94 trillion Tuesday, lower than INR 4.14 trillion Monday.

Volumes in the call and tri-party repo markets were fell slightly Tuesday due to the liquidity surplus in the banking system. Primary dealers were the largest borrower in the call money market to meet fund requirements for daily payment obligations. Trade volume in the call money market was INR 197.69 billion, marginally lower than INR 203.58 billion Monday.

As per latest data, the net liquidity absorbed by the RBI, a proxy for liquidity surplus in the banking system, rose to the highest since Aug. 5 at INR 3.95 trillion Monday, up from INR 3.68 trillion Sunday. Dealers said the liquidity surplus has increased primarily due to the government spending, with some banks also transferring excess cash held with the central bank to the SDF. Cash balances with RBI fell to INR 7.58 trillion Monday from INR 8.26 trillion Sunday.

The surplus liquidity likely fell Tuesday as payments for excise duty and tax deducted at source began, which are expected to drain around INR 700 billion of liquidity in total. Despite the outflow, demand for funds in money markets was muted and rates remained low due to the hefty liquidity surplus, dealers said.

Traders await the RBI's Monetary Policy Committee outcome on Wednesday for the central bank's commentary on liquidity and money market rates. Most dealers do not expect a variable reverse rate repo auction from the RBI this week as the weighted average rate in the call money market is still around 5.08-5.10%, higher than the lower bound of the Liquidity Adjustment Facility corridor. The central bank may conduct such an auction to drain liquidity temporarily if the weighted average call rate falls to the SDF rate of 5.00% or below, dealers said. The RBI had last held a VRRR auction on Dec. 5, accepting the full notified amount of INR 1 trillion at the three-day auction at a 5.24% cut-off rate.

OUTLOOK

On Wednesday, the one-day call money rate is likely to open below the RBI's repo rate of 5.25% due to sufficient liquidity in the banking system. The one-day call money rate is seen in the 4.70–5.20% range during the day. Call market dealers do not expect the Monetary Policy Committee to change the policy repo rate of 5.25% Wednesday.

Outflows for export duty and tax deducted at source payments scheduled this week are expected to drain liquidity from the banking system, as will the INR 182-billion payment for the state bond auction due Wednesday. However, the call and tri-party repo rates are unlikely to rise above the repo rate, given the comfortable liquidity in the system, dealers said.

CALL RATE

4.70%--Tuesday's close for one-day loans

5.15%--Tuesday's open for one-day loans

4.75%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's SDF rate as liquidity surplus most since Aug 5

MUMBAI – The interbank call money rate for one-day loans fell below the Reserve Bank of India's Standing Deposit facility rate of 5.00% as banks avoided borrowing in the money markets due to the liquidity surplus in the banking system, dealers said.

At 1605 IST, the one-day call rate was 4.80%, sharply down from the opening level of 5.15%. The weighted-average call rate was 5.10%. At 1605 IST, trade volume in the call money market was INR 187.86 billion. The bulk of the trade took place by 1200 IST, when primary dealerships were the largest borrowers in the market to meet their daily cash requirements, dealers said. 

The tri-party repo rate closed at 5.03%, above 4.85% at open and Monday's close of 5.00%. The weighted average rate in the tri-party repo market was 4.83%, marginally up from 4.78% in the previous session. The volume in the tri-party repo market was at INR 3.94 trillion, lower than INR 4.14 trillion Monday. 

The net liquidity absorbed by the RBI, a proxy for liquidity surplus in the system, rose to the highest since Aug. 5 at INR 3.95 trillion Monday, compared with INR 3.68 trillion Sunday. Dealers said the increase in liquidity was due to banks transferring cash balances held with the RBI to the SDF.

Traders await the RBI's Monetary Policy Committee outcome on Wednesday for the central bank's commentary on liquidity and money market rates. Call market dealers have mixed views on whether the RBI will conduct a variable-rate reverse repo auction to drain surplus liquidity. "If the RBI brings a VRRR auction, it will be a big surprise for us, as generally VRRR happens if the (weighted) average rate is around the SDF rate, but currently it's much higher," a dealer at a public-sector bank said.

Outflows of INR 182 billion from state bond auctions and INR 240 billion from T-bill auctions are scheduled for this week. This will not impact rates in the call and tri-party repo markets, a dealer at another public-sector bank said. (Durgesh Nandan and Shumaila Firoz)

India Call: Sharply up on early demand for funds from primary dealerships

MUMBAI – The interbank call money rate for one-day loans was sharply higher than the previous day's closing due to early demand for funds from primary dealerships to meet requirements for the state government bonds auction, dealers said. The call rate is expected to be in the range of 4.70–5.25% during the day due to surplus liquidity in the system, the dealer added. 

At 0923 IST, the one-day call rate was 5.15%, sharply higher than 4.75% for one-day loans on Monday. The weighted average call rate was 5.15%, higher than 5.08% on Monday. The tri-party repo rate was 4.81% and the weighted average rate was 4.82%, higher than 4.78% Monday. The tri-party repo rate was below the RBI's SDF rate of 5.00% due to ample liquidity with mutual funds. "...due to the beginning of this financial year (2026-27 (Apr-Mar)), people are investing more, so the mutual funds have excess liquidity, that's why TREPs (tri-party repo market) rate is down," the dealer said.   

The call rate is expected to cool down later in the day due to weaker demand for funds as most banks are seen lending, dealers said. Banks usually lend at around 5.15% in the call market in early trade and later prefer to park at the RBI's Standing Deposit Facility when the rate in the overnight market declines.

The net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 3.95 trillion Monday, the highest since Aug. 5 and up from INR 3.68 trillion Sunday. Apart from INR 800 billion outflows for excise duty payments, dealers said no other major outflows are scheduled this week. "This outflow will not affect the liquidity surplus as it's a very small amount compared to (current) liquidity in the system," the dealer added. (Durgesh Nandan) 

End

Edited by Ashish Shirke

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