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Informist, Wednesday, Apr. 8, 2026

By J. Navya Sruthi

MUMBAI – The one-day interbank call money rate ended sharply below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to low demand for funds on the back of ample liquidity in the banking system, dealers said. The tri-party repo rate ended slightly above the RBI's SDF rate while the weighted average rate of the market remained below the SDF rate.

The one-day call rate ended at 4.75% Wednesday, up from 4.70% Tuesday. The weighted average call rate was 5.08%, almost unchanged from 5.09% Tuesday. The tri-party repo rate closed at 5.04%, steady from 5.03% Tuesday. The weighted average rate in the tri-party repo market was 4.88%, up from 4.83% Tuesday. The volume in the tri-party repo market was INR 4.10 trillion, up from INR 3.94 trillion Tuesday while that in the call money market was INR 156.71 billion, down from INR 197.70 billion Tuesday.

"Volume in TREPS reduced from the past few days because of ample liquidity. If we see last month the average volume was above 4.5 lakh crores (INR 4.5 trillion)," a dealer at a large state-owned bank said. Dealers said INR 500 billion to INR 700 billion outflows were seen Wednesday for excise duty and payments for tax deducted at source. The surplus liquidity in the banking system was INR 4.02 trillion Tuesday, up from INR 3.95 trillion Monday and the highest since Aug. 2.

After assessing the RBI governor's comments during the press conference after the monetary policy statement, dealers said it is unlikely the RBI will announce a variable rate reverse repo auction despite ample liquidity. "WAR (Weighted average call rate) should fall below 5%, only then we can expect any VRRR," a dealer at a primary dealership said.

RBI Governor Sanjay Malhotra said the RBI had consciously let the weighted average rate be at the lower end of the liquidity adjustment facility corridor. Dealers said the central bank is comfortable with current liquidity in the banking system and call rate. "When there is so much of an uncertainty, we want to give the comfort to the banks that liquidity will not be in deficit. And so, that's why we have allowed it (weighted average call rate) to be in the lower end," Malhotra said. "It's not outside the LAF. And it's only to give them the comfort. It is not any signal for a rate reduction or anything," he said.

The RBI has decided to expand the participation in the term money market segment, Malhotra said Wednesday while detailing the decision of the Monetary Policy Committee. All India financial institutions and non-banking finance companies, including housing finance companies, will be allowed to participate in the term money market. The RBI will also raise the borrowing limit for standalone primary dealers in the term money market, Malhotra said.

According to the RBI, standalone primary dealers are currently allowed to borrow, on an average in a reporting fortnight, up to 225% of their net owned funds as at the end March of the preceding financial year. They may lend up to 25% of their net owned funds in term money market on an average in a reporting fortnight.

Commenting on these announcements, the dealer at the major state-owned bank said, "Right now there isn't much volume in call (market) compared to other (money markets). Now after these changes, the market will deepen, which will make it a strong rate. The RBI wants to give strong place to WACR (weighted average call rate)." Dealers and fund managers said the usual 15–20 basis points spread between the call rate and tri-party repo rate would narrow. The market now awaits details on the changes announced by the RBI Wednesday.

OUTLOOK

Thursday, the one-day call money rate is likely to open around 5.15% on early demand for funds. Ample liquidity in the banking system will keep rates near the RBI's SDF rate throughout the day. The one-day call money rate is seen at 4.75–5.15% during the day and the weighted average call rate is likely to be 5.05-5.10%. The tri-party repo rate is expected to open at 4.85-4.90%, below the RBI's SDF rate, as there are no major outflows scheduled Thursday.

CALL RATE

4.75%--Wednesday close for one-day loans

5.15%--Wednesday open for one-day loans

4.70%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Falls below SDF; fear of VRRRs eases after RBI Malhotra comments

MUMBAI – The interbank call money rate for one-day loans was below the Reserve Bank of India's Standing Deposit facility rate of 5.00% due to a comfortable liquidity surplus in the banking system, dealers said. The call rate is expected to close in the range of 4.70–4.80% and the weighted average rate will be around 5.06-5.07%, they said.

At 1602 IST, the tri-party repo rate was at 5.04%, marginally higher than 5.03% Tuesday. The weighted average rate in the tri-party repo market was 4.88%, marginally higher than 4.83% the previous day. The volume in the tri-party repo market was INR 4.9 trillion, higher than INR 3.9 trillion Tuesday. In the tri-party repo market, big banks are borrowing to meet credit off-take and mutual funds are on the lending side due to the excess liquidity.

At 1602 IST, the one-day call rate was 4.80%, down from the opening level of 5.15% Wednesday. The weighted-average call rate was 5.09% due to early demand for funds from primary dealerships to meet their daily payment obligations, dealers said. 

Rates in the call money market and the tri-party market traded in the same band as on Tuesday after the RBI's Monetary Policy Committee decided to keep the repo rate unchanged at 5.25%. RBI Governor Sanjay Malhotra also said the central bank would keep banking system liquidity in a comfortable surplus, even allowing the weighted average call rate below the repo rate.

The net liquidity absorbed by the RBI rose to the highest since Aug. 2 at INR 4.02 trillion Tuesday, compared with INR 3.95 trillion Monday, an indication of the liquidity surplus in the banking system. In addition to government spending, inflows from foreign portfolio investors into the equity market likely led to an increase in rupee liquidity, dealers said. 

Most banks expect liquidity conditions to remain in a comfortable surplus after the RBI governor's comments. While the market was divided on whether the central bank would temporary drain liquidity through a variable rate reverse repo auction, those fears were quelled after the MPC outcome and press conference. However, some traders still expect such an action, though the bar for it will be high and linked to both the liquidity surplus and call rates. 

"If the liquidity surplus goes past the 5 lakh 50 thousand crores (INR 5.5 trillion) mark, then we could only expect the RBI to come with VRRR auction," a dealer at a state-owned bank said. (Durgesh Nandan)

India Call: Up on early demand for funds but below repo on surplus liquidity

MUMBAI – The one-day interbank call money rate was up Wednesday due to usual demand for funds from primary dealerships in the early hours of trade, dealers said. However, the call rate was below the Reserve Bank of India's repo rate of 5.25% as the liquidity surplus in the banking system was above INR 4 trillion. The tri-party repo rate was below the RBI's Standing Deposit Facility rate of 5.00% due to low demand for funds ahead of the RBI's Monetary Policy Committee decision.  

Dealers expect the call rate to fall below the SDF rate of 5% as most state-owned banks are seen lending in the market. Around INR 600 billion of outflows are scheduled for Wednesday for excise duty and tax deducted at source payments, dealers said. These outflows are unlikely to lead to a rise in overnight rates as there is ample liquidity in the banking system after accounting for the tax payments, dealers said.  

The net liquidity absorbed by the RBI, a proxy for the liquidity surplus, was INR 4.02 trillion Tuesday, up from INR 3.95 trillion Monday. The liquidity surplus in the banking system was the highest since Aug. 2.    

Many dealers expect the MPC to stick to its neutral stance in its policy decision, due at 1000 IST. "This time he (governor) will be very cautious as yields are already high and there are no chances for any hawkish statements this time," a dealer at a state-owned bank said. 

Despite a liquidity surplus of INR 4 trillion in the banking system, dealers do not see the RBI conducting a variable rate reverse repo auction. "Global crisis is happening and with already high yields, I don't think there will be a VRRR," a dealer at a primary dealership said. Dealers now await the commentary on liquidity at 1000 IST.

At 0928 IST, the one-day call rate was 5.15%, up from 4.70% Tuesday, and the tri-party repo rate was 4.89%, down from 5.03%. The weighted average call rate was 5.15%, up from 5.09%, and the average rate so far in the tri-party repo market was 4.91%, higher than 4.83% Tuesday. (J. Navya Sruthi)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

With inputs from Shumaila Firoz and Durgesh Nandan 

Edited by Ashish Shirke

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