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Informist, Friday, Apr. 24, 2026

By Durgesh Nandan

MUMBAI – The three-day interbank call money rate ended below the Reserve Bank of India's repo rate of 5.25% owing to the ample liquidity surplus with banks after the reversal of the INR 2-trillion variable rate reverse repo auction conducted by the RBI on Apr. 17, dealers said. The tri-party repo market rate ended marginally above the RBI's standing deposit facility rate of 5.00% on low demand for funds and surplus liquidity with most mutual funds, they said. 

The three-day call money rate ended at 5.11% Friday, down from 5.30% for one-day loans Thursday. The weighted average rate was also 5.11%, down from 5.25% the previous day. The volume in the call money market was INR 240.46 billion, down from INR 250.06 billion in the previous session. The call money market rate rose slightly after the tri-party repo market had shut for the day as there was late demand from some banks to meet three-day funding requirements. The call rate ended below the repo rate after two consecutive days of closing above the repo rate on demand for funds from banks for goods and services tax outflows, dealers said. 

The three-day tri-party repo rate ended at 5.04% Friday, up marginally from Thursday's close of 5.00% for one-day loans. The weighted average rate was 5.03%, down from 5.12% Thursday. The volume in the tri-party repo market was INR 4.94 trillion, up from INR 4.86 trillion Thursday because of more borrowing from banks to meet three-day requirements, dealers said.

"Rates in the overnight market were lower today (Friday) from Thursday, as there was surplus liquidity with banks due to the maturity of VRRR (auction)," a dealer at a public-sector bank said. The net liquidity absorbed by the RBI--a proxy for the liquidity surplus in the banking system--was INR 2.99 trillion Thursday, down from INR 3.30 trillion Wednesday, according to the latest data. Liquidity fell because of outflows for GST payments this week. The cash balances of banks with the RBI rose to INR 7.98 trillion Thursday from INR 7.87 trillion Wednesday.

Dealers do not expect a VRRR auction for the rest of the month as the government's month-end spending is likely to begin Wednesday. There will be demand for funds in the second half of next week because of the fortnight ending on Apr. 30, so the RBI is seen unlikely to drain liquidity till the end of the month, they said.

"We expect the RBI will come up with VRRR only if (surplus) liquidity will cross 4 lakh crore (INR 4 trillion), which is likely to happen in the first week of May," a dealer at another public-sector bank said.

OUTLOOK

On Monday, the one-day call money rate is likely to open at 5.10-5.20%. Dealers expect the call rate to be around 5.15% during the day, while the tri-party repo rate is expected to be in the range of 4.90–5.15% on the back of ample surplus liquidity in the banking system. Dealers expect the weighted average call rate to be in the range of 5.10-5.15% for Monday, while the weighted average tri-party repo market rate is likely to be in the range of 4.95-5.05%.

Dealers said the rates in the overnight market will not rise above the repo rate as there is not likely to be a demand for funds from banks for the next two or three sessions. The weighted average call rate will be around 5.15% and the weighted average rate in the tri-party repo market is likely to be in the band of 4.95-5.05% for the first half of next week. Rates in the overnight market are expected to rise in the later part of the week if the government's month-end spending does not begin by Wednesday as banks will need funds for the fortnight end on Apr. 30, they said.
 

CALL RATE

5.11%--Friday close for three-day loans

5.15%--Friday open for three-day loans

5.30%--Thursday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Down as demand falls after VRRR reversal eases liquidity with banks

MUMBAI – The three-day interbank call money rate was down from the Friday's opening level as liquidity improved following the reversal of funds parked under the Reserve Bank of India's variable rate reverse repo auction, dealers said. Banks and primary dealerships also met their early demand for funds ahead of the weekend.

Liquidity in the banking system had tightened earlier this week due to goods and services tax outflows, pushing up call money rates above the policy repo rate in the past two sessions. Even though the RBI's net liquidity absorbed--a proxy for the liquidity surplus--was above INR 3 trillion, the effective cash with banks was limited as they had parked INR 2 trillion at the RBI's seven-day VRRR auction on Apr. 17. The maturity of the auction on Friday brought down money market rates, dealers said.

At 1600 IST, the three-day call rate was 4.65%, sharply down from Friday's opening level of 5.15% and also from Thursday's close of 5.30%. The weighted average call rate was 5.12%, down from 5.25% Thursday. The trading volume was INR 199.52 billion. During the day, the call money rate is expected in the range of 4.60–5.15% for the rest of the day, dealers said. 

At 1600 IST, the three-day tri-party repo rate closed at 5.04%, slightly higher than 5.00% at the open and also from Thursday's close of 5.00% for one-day loans. The weighted average tri-party repo rate was 5.03%, down from 5.12% Thursday.

With the RBI skipping an announcement of a VRRR auction Friday after market hours Thursday, traders were initially wary that the central bank may announce an auction to drain liquidity in the middle of the day. With no such notice appearing, dealers said they do not expect another VRRR auction until government spending at the end of the month adds to banking system liquidity. This will keep keep money market rates below the repo rate despite the reporting fortnight nearing its end, they said.

For the fortnight ending Thursday, banks have to maintain an average daily cash balance of INR 8.07 trillion, a larger-than-usual rise from INR 7.76 trillion for the Apr. 15 fortnight, due to the seasonal accretion of deposits at the end of the financial year.

"...after mid-April, deposits tend to moderate, which lowers NDTL (net demand and time liabilities) and, in turn, reduces CRR (cash reserve ratio) requirements. This leaves banks with more surplus funds, easing their reliance on overnight borrowings and putting some downward pressure on rates," a dealer at a private-sector bank said.  (Shumaila Firoz) 

India Call: Down on reversal of INR 2-tln VRRR; mkt divided on another VRRR 

MUMBAI – The three-day interbank call money rate was down Friday and below the Reserve bank of India's repo rate of 5.25% on the back of reversal of INR 2 trillion to the banking system from a seven-day variable rate reverse repo auction, dealers said. Primary dealerships were borrowing in early trade to meet the usual requirement, dealers said. Dealers expect the rates to fall further during the day due to lack of major demand for funds in the market.

At 1015 IST, the three-day call rate was 5.10%, lower from 5.30% Thursday. The weighted average call rate was 5.15%, also lower from 5.25% Thursday. Trade volume in the call money market was INR 96.90 billion. At the same time, the three-day tri-party repo rate was 5.04%, up from 5.00% Thursday. The weighted average rate was 5.02%, down from 5.12% Thursday. The volume in the tri-party repo market was INR 2.64 trillion. Dealers expect the weighted average call rate to be around 5.15% for Friday, while the weighted average tri-party repo market rate is likely to be in the range of 4.95-5.00%.

Banks received INR 2 trillion Friday because of the reversal of the VRRR auction conducted on Apr. 17 which eased demand for funds from the banks, dealers said.

Market participants are divided if the RBI would conduct another VRRR Friday. Some do not expect the central bank to roll over the seven-day VRRR auction or conduct another VRRR auction, dealers said.

"We don't expect the RBI to come up with any VRRR (auction) now due to low (surplus) liquidity in the (banking) system," a dealer at a small finance bank said. "If RBI would had to conduct VRRR then it would have announced it yesterday (Thursday), it indicates they will not conduct another one today (Friday)." 

However, some dealers expect the central bank to conduct another VRRR auction Friday due to ample liquidity surplus in the banking system and inflows from the government's month-end spending scheduled next week. A dealer at a state-owned bank expects the RBI to conduct another seven-day VRRR for INR 1 trillion later Friday. 

If the RBI conducts another VRRR auction, call money market rate could rise to around 5.20% during the day due to borrowing requirements for three days, a dealer at another state-owned bank said. Otherwise, rates are expected to be near the RBI's Standing Deposit Facility rate of 5.0% due to surplus liquidity in the banking system.

The net liquidity absorbed by the RBI was INR 2.99 trillion Thursday, down from INR 3.30 trillion Wednesday, according to the latest data. Liquidity surplus fell due to around INR 250 billion outflows for payments of goods and services tax and as banks increased their cash balances with the RBI. Cash balances with the RBI rose to INR 7.98 trillion Thursday from INR 7.87 trillion Wednesday, but still lower from the average daily cash requirement of INR 8.07 trillion for the fortnight ending Apr. 30. There are no major inflows and outflows scheduled for the day.  (Durgesh Nandan)  End

Edited by Rajeev Pai

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