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Informist, Wednesday, May 6, 2026

By Shumaila Firoz 

MUMBAI – The one-day interbank call money rate closed below the Reserve Bank of India's repo rate of 5.25% but slightly above the standing deposit facility rate of 5.00% on Wednesday despite comfortable liquidity in the sytem, dealers said. The tri-party repo rate ended marginally above the standing deposit facility rate due to requirement for funds from banks, they added.

"In the overnight market, banks are borrowing due to strong credit offtake, which has raised their funding requirements," a dealer at a private-sector bank said. 

The RBI will conduct a four-day variable rate repo auction for INR 750 billion between 0930 IST and 1000 IST Thursday, the central bank announced after market hours Wednesday. The RBI's VRR announcement came as a surprise amid comfortable liquidity conditions in the banking system, dealers said. Traders attributed the VRR auction announcement to the upcoming excise duty outflows due Thursday, which would drain out nearly INR 400-500 billion, impacting the liquidity levels. Some dealers said the VRR auction might help to ensure the short-term liquidity remains adequate.

"Liquidity was already comfortable, so the VRR was not widely expected," a dealer at a private-sector bank said. "It is likely the RBI is positioning ahead of the excise duty outflows."

Wednesday, the one-day call money rate ended at 5.10%, sharply up from 4.75% Tuesday. The weighted average rate was 5.17%, unchanged from Tuesday. The volume in the call money market was INR 156.65 billion, down from INR 167.62 billion Tuesday. 

The one-day tri-party repo rate ended at 5.05% Wednesday, up from 4.89% Tuesday. The weighted average rate was 5.06%, higher than 5.03% Tuesday. The volume in the tri-party repo market was INR 4.95 trillion, down from INR 4.70 trillion Tuesday. The tri-party rate opened at 5.09%, and traded in the range of 4.90% to 5.10%. 

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 2.80 trillion Tuesday, up from INR 2.57 trillion Monday. The liquidity surplus rose as banks lowered their cash balances with the RBI to INR 7.78 trillion Tuesday, down from INR 7.89 trillion Monday. Additional support came from inflows of INR 61.4 billion Tuesday, driven by coupon payments on the 6.33%, 2035 bond and state bonds.

Looking ahead, dealers expect liquidity conditions to ease further after mid-May, when the RBI usually transfers its surplus to the government. The central bank is likely to transfer between INR 2.5 trillion and INR 2.8 trillion to the Centre as its surplus for the financial year 2025–26 (Apr-Mar). 

OUTLOOK

Thursday, the one-day interbank call money rate is likely to open at 5.20-5.25% due to sufficient liquidity in the banking system. The one-day call money rate is seen in the 4.80-5.25% range during the day, whereas the tri-party repo rate is expected to be in the range of 4.90–5.10%. The weighted average call rate will be in the range of 5.16-5.20% and that in the tri-party repo market is likely to be in the band of 5.00-5.10% Thursday, dealers said. 

Outflows of excise duty due Thursday will drain between INR 400 billion and INR 500 billion from banking system liquidity. 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

5.10%--Wednesday close for one-day loans

5.25%--Wednesday open for one-day loans

4.75%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Falls below SDF rate as demand from PDs, banks eases 

MUMBAI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Wednesday after opening at the repo rate as primary dealerships and some banks met their demand for funds earlier in the day, dealers said. Comfortable liquidity in the banking system ensured that rates did not move above the RBI's repo rate, they said.

At 1600 IST, the one-day call rate was 4.90%, down from Wednesday's opening level of 5.25% but higher than Tuesday's close of 4.75%. The weighted average call rate was 5.19%, up from 5.17% Tuesday. Trade volume in the contract was INR 146.46 billion, down from 157.83 billion at 1535 IST Tuesday. For the rest of the day, the call money rate is seen in the range of 4.80–5.20%, dealers said.

At 1600 IST, the one-day tri-party repo market rate closed at 5.05%, down from Wednesday's opening of 5.09%. The weighted average tri-party repo rate was 5.06%, up from 5.03% Tuesday. Trade volume in the contract was INR 4.95 trillion, up from INR 4.70 trillion Tuesday.

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 2.80 trillion Tuesday, up from INR 2.57 trillion Monday. Dealers said the scheduled net outflows of INR 114 billion on Wednesday, which included payments for the state bond auction held Tuesday, did not have a signficant impact on rates or banks' cash needs.

An outflow of around INR 400 billion–INR 500 billion on account of excise duty payments due Thursday is also unlikely to push up the call money rate above the repo rate of 5.25% as liquidity in the banking system would remain in a surplus above INR 2 trillion, dealers said. "Liquidity is comfortable, so even with excise duty outflows, rates are expected to remain stable around the repo rate," a dealer at a public sector bank said.  

Looking ahead, dealers expect liquidity conditions to ease further after mid-May, when the RBI usually transfers its surplus to the government. The central bank is likely to transfer between INR 2.5 trillion and INR 2.8 trillion to the Centre as its surplus for financial year 2025-26 (Apr-Mar). In a report Monday, IDFC FIRST Bank pegged the transfer at last year's record high of INR 2.7 trillion. This is likely to add to system liquidity and put downward pressure on overnight rates, dealers said.  (Shumaila Firoz) 

India Call: Up on early demand from PDs despite surplus liquidity 

MUMBAI – The one-day interbank call money rate rose Wednesday and was at the Reserve bank of India's repo rate of 5.25% due to the usual early demand for funds from primary dealerships, dealers said. However, dealers expect the rate to fall during the day due to the comfortable liquidity surplus in the banking system.   

"PDs (primary dealerships) usually borrow in call early, mainly for daily business operations. Rates in the overnight market are likely to cool down as there is surplus liquidity in the banking system," a dealer at a public-sector bank said.

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 2.80 trillion Tuesday, up from INR 2.57 trillion Monday. The liquidity surplus increased as banks reduced their cash balances with the RBI to INR 7.78 trillion Tuesday from INR 7.89 trillion Monday. Inflows for coupon payments on the 6.33%, 2035 bond and on state bonds totalling INR 61.4 billion Tuesday also supported the liquidity in the banking system. 

The one-day tri-party repo rate opened above the RBI's Standing Deposit Facility rate due to usual demand for funds from banks. However, these rates are expected to ease later after the early demand subsides, a dealer at a private-sector bank said. 

At 0952 IST, the one-day call rate was at 5.25%, up from 4.75% Tuesday and the weighted average call rate was also 5.25%, up from 5.17% Tuesday. Trade volume in the call money market was INR 41.54 billion. The one-day tri-party repo rate was 5.08%, up from 4.89% Tuesday. The weighted average rate for tri-party repos was also 5.06%, up from 5.03% Tuesday. The volume in the tri-party repo market was INR 2.09 trillion.  (Shumaila Firoz) 

End 

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

Edited by Deepshikha Bhardwaj

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