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Informist, Monday, Apr. 13, 2026

By Durgesh Nandan

MUMBAI – The two-day interbank call money rate ended Monday below the Reserve Bank of India's repo rate of 5.25% but above the standing deposit facility rate of 5.00% despite ample surplus liquidity in the banking system and low demand for funds. Dealers said a bank was likely to have borrowed near the end of trade to meet a two-day funding requirement with a thin option of lenders, and the trade was done above the SDF rate. The last trade in the call money market on the RBI's Negotiated Dealing System was conducted at 1828 IST for INR 750 million. The financial markets are shut Tuesday for Ambedkar Jayanti.

The two-day call rate ended at 5.10% Monday, up from 4.75% for three-day loans Friday. The weighted average call rate was 5.04%, the same as on Friday. Trade volume in the call money market was INR 159.31 billion, up a little from INR 156.47 billion Friday.

The call-money market rate was on the higher side later in the day due to demand for funds to fulfil two-day borrowing requirements nearing the end of the reporting fortnight Wednesday, dealers said. Due to ample liquidity in the system, a majority of banks were on the lending side, dealers said. As usual primary dealerships were on the borrowing side to satisfy daily cash requirements, they said.

The tri-party repo rate also ended at 5.10%, up from 5.00% Friday. The weighted average rate in the tri-party repo market was 4.82%, against 4.79% in the previous session. The volume in the tri-party repo market was INR 4.06 trillion, similar to Friday. The tri-party repo rate was largely below the SDF rate with mutual funds sitting on cash as banks invest funds amid surplus liquidity at the beginning of the financial year, dealers said.

As per the latest figures, the net liquidity absorbed by the RBI was INR 5.55 trillion Sunday, unchanged from Saturday and the highest since May 2022. The liquidity surplus rose primarily because of redemption of the 5.63%, 2026 bond over the weekend, adding nearly INR 900 billion in liquidity. Dealers expect the liquidity surplus to be in the range of INR 5.0 trillion-INR 5.5 trillion throughout the week.

Dealers expect an outflow of INR 1.8 trillion for payment of goods and services tax at the beginning of next week. After the outflow, the surplus liquidity is expected to fall to around INR 3.5 trillion in the latter half of the week.

Traders were divided over whether the central bank would conduct a variable rate reverse repo auction this week. A few dealers said the RBI could come up with a VRRR for INR 1 trillion–INR 2 trillion for a tenure of up to four days, not longer, with payment for goods and services tax scheduled at the beginning of next week. Others said the central bank would only consider a rollover when the seven-day auction conducted Friday is due for reversal.

"We could expect a rollover of INR 2 trillion from Friday's VRRR as there is still surplus liquidity in the system due to G-Sec (government securities) maturity and redemption of bonds, if (surplus) liquidity will be in the same range (around INR 5 trillion)," a dealer at a large public-sector bank said, "if the RBI doesn't come up with another VRRR (auction until then)."

Dealers said banks have started pre-paying the 90-day variable rate repo auctions conducted by the RBI in January, which are due for reversal Apr. 30. Banks have begun repaying the VRR amount because they have excess liquidity and the cost of those borrowings is higher than the current rates in the overnight market, dealers said.

OUTLOOK

The financial markets are shut Tuesday for Ambedkar Jayanti. Wednesday, the one-day call money rate is likely to open at 5.10-5.15% on early demand for funds from primary dealerships and banks. Dealers expect the rate to be on the higher side--closer to the repo rate--due to requirement for funds for the reporting fortnight ending Wednesday.

The call rate is expected to be in the range of 4.65-5.25% Wednesday on the back of ample liquidity in the banking system. The weighted average call rate is expected to be around 5.10%, while the weighted average tri-party repo rate may be 4.80-5.05%.

CALL RATE

5.10%--Monday close for two-day loans

5.10%--Monday open for two-day loans

4.75%--Friday close for three-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF rate on surplus liquidity, low demand for funds

MUMBAI – The two-day interbank call money rate was below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to surplus liquidity in the system and weaker demand for funds, dealers said. The rate fell after primary dealerships met demand for funds during the early hours of trade, dealers said. Till 1200 IST, primary dealerships were involved in INR 100 billion of trading in the call-money market, a dealer at a public sector bank said.  

At 1425 IST, the two-day call rate was at 4.75%, down from Monday's opening at 5.10% and unchanged from Friday. The weighted average call rate was 5.06%, higher than 5.04% Friday. Trade volume in the call money market was INR 142.3 billion. The tri-party repo rate was at 4.75%, lower than Monday's opening at 4.90% and 5.00% Friday. The weighted average tri-party repo rate was 4.85% higher than 4.79% Friday, due to weaker demand for funds, dealers said.

According to the latest data, the net liquidity absorbed by the RBI was INR 5.55 trillion Sunday, unchanged from Saturday and was the highest since May 2022. Liquidity surplus rose due to the redemption of the 5.63%, 2026 bond Friday, adding nearly INR 900 billion in liquidity.

Most dealers expect the banking system's liquidity to rise to INR 6 trillion this week, driven by the upcoming redemption of another government security on Friday. However, a few dealers said it is unlikely that liquidity would rise to INR 6 trillion.

Earlier, dealers were expecting the central bank to conduct another variable rate reverse repo auction for INR 1 trillion Monday, but so far there has been no announcement about another VRRR auction. The RBI conducted a seven-day VRRR auction trillion on Friday and accepted offers worth INR 2.00 trillion.  

Dealers said banks have started to pre-pay the 90-day variable rate repo auctions conducted by the RBI in January, which is due on Apr. 30. "Our bank has already paid the January VRR auction amount of INR 10 thousand crore (INR 100 billion) to the RBI," a dealer at a state-owned bank said. Banks have begun repaying the VRR amount because they have excess liquidity and a higher cost of funds than in the overnight market, dealers said. 

In January, the RBI conducted two 90-day VRR auctions and infused INR 1.37 trillion of transient liquidity to support the banking system. As per the RBI data, banks have already paid INR 777.64 billion to the RBI.  (Durgesh Nandan and Shumaila Firoz)

India Call: Sharply up on demand from PDs, banks, but remains below repo rate

MUMBAI – The two-day interbank call money rate was sharply up Monday due to demand for funds from primary dealerships and banks, 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 the highest in nearly four years. The tri-party repo rate was below the RBI's Standing Deposit Facility rate of 5.00% due to surplus liquidity. The money market will be shut Tuesday on account of Ambedkar Jayanti.

At 0943 IST, the two-day call rate was at 5.10%, sharply higher than 4.75% for three-day loans on Friday. The weighted average call rate was also 5.10%, higher than 5.04% on Friday. Trade volume in the call money market was INR 52.05 billion.

A dealer at a private-sector bank said banks were seen borrowing Monday to meet demand to fulfil credit outflow requirements. Borrowing for two-day loans ahead of the reporting fortnight also led banks to borrow in the overnight market, the dealer said. 

At the same time, the tri-party repo rate and the weighted average rate were at 4.91%. The weighted average rate in the tri-party repo market Friday was 4.79%. The volume in the tri-party repo market was INR 1.3 trillion. However, traders expect the tri-party repo rate to rise above the SDF rate during the day due to demand for funds despite the ample liquidity in the system as banks had parked their funds at the RBI's seven-day variable rate reverse repo auction Friday.

The net liquidity absorbed by the RBI, an indication of a liquidity surplus in the banking system, was INR 5.54 trillion Friday, which was the highest since May 4, 2022 and also, sharply higher than INR 4.55 trillion Thursday. Liquidity in the banking system increased primarily due to an inflow of INR 865.1 billion on redemption of 5.63%, 2026 bond and a few coupon payments also led to a rise in systemic liquidity. 
 

Dealers don't expect the surplus liquidity to go past INR 6 trillion because of outflows for payment of goods and services tax scheduled next week and settlement of two variable rate repo auctions scheduled at the end of this month. They said the surplus liquidity will remain at INR 5 trillion to INR 5.5 trillion this week. "We expect another overnight or two days VRRR for 1 lakh crore (INR 1 trillion) from RBI today (Monday) as banks still have surplus liquidity with them," the dealer at the private sector bank said.  (Durgesh Nandan)  End

Edited by Rajeev Pai

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