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Informist, Thursday, Apr. 9, 2026

MUMBAI – The call rate ended above the Reserve Bank of India's Standing Deposit Facility rate of 5.00% for the first time in financial year 2026-27 (Apr-Mar) despite the ample liquidity surplus in the banking system, dealers said. A bank may have borrowed late in the day to meet a funding requirement with a thin option of lenders, with the last trade coming at 1840 IST for INR 750 million.

The one-day call rate ended at 5.10% Thursday, sharply up from 4.75% for one-day loans Wednesday. The weighted average call rate was 5.08%, the same as Wednesday. As usual, primary dealerships were the largest borrowers in the call money market to meet daily fund requirements and a few public sector banks also borrowed in the call money market to fulfil their day-to-day needs, dealers said. Trade volume in the call money market was INR 176.73 billion, higher than INR 156.71 billion Wednesday.

The tri-party repo rate ended at 4.50%, sharply down from 5.04% Wednesday. The weighted average rate in the tri-party repo market was 4.81%, down from 4.88% the previous day. The volume in the tri-party repo market was INR 4.12 trillion, almost unchanged from Wednesday.

For the last three days, the tri-party repo market has traded below the SDF rate and volumes have also decreased compared to last month as borrowing requirements have reduced. As returns in money markets have fallen, banks are investing their surplus cash in the short-term debt market, corporate bonds, government securities, and mutual fund schemes.

"Banks are adding to their SLR (statutory liquidity ratio) book due to more liquidity," a dealer at a small finance bank said. "They have also been investing in other financial markets and in mutual funds, which is why volumes are lower in the overnight market for the past few days."

According to latest data, the net liquidity absorbed by the RBI rose to the highest since May. 19, 2022, at INR 4.57 trillion Wednesday, higher than INR 4.02 trillion Tuesday. The surplus liquidity was over 1.8% of banks' net demand and time liabilities against the 1% surplus that the RBI had indicated as comfortable. The increase in liquidity was due to government spending and redemption of the 7.27%, 2026 gilt, dealers said.

Dealers are divided on whether the RBI will conduct a variable rate reverse repo auction as the liquidity surplus approaches INR 5 trillion. Comments of RBI Governor Sanjay Malhotra Wednesday suggested to call money traders that the central bank was unlikely to drain liquidity in order to keep comfortable liquidity in the hands of banks in view of the West Asia war.

Goods and services tax outflows are expected to drain around INR 1.8 trillion from the banking system by Apr. 20. Even after the outflows, the liquidity surplus will be in the range of INR 2.75 trillion and INR 3.25 trillion, which traders still consider comfortable. There was no significant increase in currency in circulation and a drawdown in the banking system liquidity from the assembly elections in Keralam, Assam, and Puducherry this week.

The RBI's decision to include All India Financial Institutions and non-banking financial companies in the term money market may have a mixed impact on the market. These entities are expected to be both borrowers and lenders when included in the money markets.

"We don't think other than SIDBI (Small Industries Development Bank of India) and NABARD (National Bank for Agriculture and Rural Development) anyone will lend," a dealer at a private-sector bank said. "Big NBFCs may lend, but small NBFCs and other participants will only borrow."

OUTLOOK

Friday, the three-day call money rate is likely to open at 5.10-5.15% on early demand for funds from primary dealerships. Ample liquidity in the banking system will keep rates near the RBI's SDF rate throughout the day. The three-day call money rate is seen at 4.75–5.15% during the day and the weighted average call rate is likely to be around 5.09%. The tri-party repo rate is expected to open at 4.85-4.90%, below the RBI's SDF rate, due to surplus liquidity in the banking system and weaker demand for funds. The only major scheduled inflow on Friday is INR 128 billion for the maturity of 364-day Treasury bills.

CALL RATE

5.10%--Thursday close for one-day loans

5.15%--Thursday open for one-day loans

4.75%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF on low demand as liquidity rises to highest in 4 years

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 weighted average rate around 5.06-5.09%, dealers said. The surplus liquidity in the banking system is at its highest level in almost four years. 

The tri-party repo rate ended at 4.50%, sharply down from 5.04% Wednesday. The weighted average rate in the tri-party repo market was 4.81%, down from 4.88% the previous day. The volume in the tri-party repo market was INR 4.12 trillion, almost unchanged from Wednesday. For the last three days, the tri-party repo market has opened below the SDF level, and volumes have also decreased compared to last month.

"It's (volume) usually around INR 4.5 trillion – INR 5 trillion," a dealer at a public-sector bank said. "We are expecting that market participants in the tri-party repo market are regulating volumes to raise the rates above the SDF level. Participants may bring the volumes around 3.5-3.8 lakh crore (INR 3.5 trillion – INR 3.8 trillion) to support the rate."  

At 1612 IST, the one-day call rate was at 4.85%, sharply down from the opening level of 5.15% Thursday. 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. The volume in the call money market was INR 167.97 billion. The call rate is usually high in the early hours of trading due to primary dealerships' demands to meet their daily payment obligations. Primary dealerships are the largest borrowers in the market and only a handful of state-owned banks are on the borrowing side to fulfil their daily demands, a dealer at another public-sector bank said.

Dealers have mixed views on the RBI conducting a variable rate reverse repo auction this fortnight. A few dealers are expecting VRRR as early as Friday due to low money market rates and the high liquidity surplus. The RBI may also act to pull up money market rates if the weighted average call rate slips below 5.05% and towards the 5.00% lower band of its Liquidity Adjustment Facility corridor, dealers said.

Dealers said they are not expecting any mid-month government spending. "We are not expecting any government spending as cash balance is around 2 lakh crore – 3 lakh crore (INR 2 trillion – INR 3 trillion) and for the last 2–3 years they have been maintaining this amount," a dealer at a private-sector bank said.

As per the recent figures, the net liquidity absorbed by the RBI rose to the highest since May. 19, 2022, at INR 4.57 trillion Wednesday, higher than INR 4.02 trillion Tuesday. The surplus liquidity was over 1.8% of banks' net demand and time liabilities against the 1% surplus that the RBI had indicated as comfortable.

Dealers do not expect surplus liquidity to cross the INR 5-trillion mark despite some scheduled inflows next week. Some banks have increased their investment in government bonds rather than parking funds in the SDF, a dealer at a public-sector bank said. Banks' need for cash will increase towards the end of the reporting fortnight on Wednesday, while payments for goods and services tax around Apr. 20 will drain liquidity. (Durgesh Nandan)

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

MUMBAI – The one-day interbank call money rate was sharply up Thursday from the previous day's close due to 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 surplus liquidity in the banking system was at its highest level in nearly four years. The tri-party repo rate was below the RBI's Standing Deposit Facility rate of 5.00% due to low demand for funds and liquidity surplus. 

At 1006 IST, the one-day call rate was at 5.15%, sharply higher than 4.75% for one-day loans on Wednesday. The weighted average call rate was 5.14%, higher than 5.08% on Wednesday. Trade volume in the call money market was INR 80.04 billion. The call rate is expected to move in the range of 4.60-5.15% throughout the day due to weak demand for funds, dealers said. 

At the same time, the tri-party repo rate was 4.84% and the weighted average rate was 4.83%, lower than 4.88% Wednesday. The volume in the tri-party repo market was INR 2.00 trillion. "...Due to excessive liquidity and low demand for funds, TREPs rate (tri-party repo market) is continuously below the SDF level," a dealer at a public-sector bank said. 

The net liquidity absorbed by the RBI rose to the highest since May 19, 2022, at INR 4.57 trillion Wednesday, higher than INR 4.02 trillion Tuesday, an indication of the excessive liquidity surplus in the banking system. Liquidity in the banking system increased primarily due to inflows of redemption of government securities and coupons on bonds. The major inflow seen Wednesday was INR 348.57 billion on account of redemption of the 7.27%, 2026 bond. "The surplus liquidity has also increased due to foreign investments in the equity market, but today (Thursday) it (foreign investments) could fall as well, as the Nifty is down around 200 points and it could lead to outflows," the dealer said.

Dealers expect the surplus liquidity to remain around INR 4 trillion due to the outflow for payment of goods and services tax and repayment for two 90-day variable rate repo auctions scheduled at the end of this month. However, the drain on liquidity due to these outflows would be offset by inflows through the government's month-end expenditure for salaries and pensions, dealers said.

"We don't expect the surplus liquidity to go past the 5 lakh crore (INR 5 trillion) mark because of the outflows such as GST (goods and services tax), the settlement for two VRRs scheduled this month," a dealer at a private sector bank said. "Next month there are many settlements for SDL (State Development Loan) and it will keep the liquidity in comfortable position but not much higher," the dealer said.(Durgesh Nandan)

End

With inputs from J. Navya Sruthi and Shumaila Firoz

Edited by Ashish Shirke

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