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Informist, Tuesday, May 12, 2026

By Shumaila Firoz 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00%, as early demand for funds from primary dealerships and banks subsided, dealers said. The last trade in the call money market on the RBI's Negotiated Dealing System was conducted at 1739 IST for INR 200 million, as a significant portion of the day's volume had already been traded in the overnight market during the first half. The weighted average call rate was at the repo rate. 

Tuesday, the one-day call money rate ended at 4.75%, sharply lower than 5.35% at open and unchanged from Monday. The weighted average rate was 5.25%, down from 5.31% Monday. The volume in the overnight market was INR 160.51 billion, down from INR 161.11 billion Monday. 

Rates had opened above the repo rate in the morning due to strong demand for funds ahead of the state government securities' auction, along with borrowing by banks to meet credit offtake. However, as participants largely met their funding needs in early trade, pressure on rates eased through the day. "The usual trend has been that rates remain elevated in the morning due to front-loaded demand from primary dealers and banks, but cool off by evening once requirements are met," a dealer at a public-sector bank said. 

Dealers said the decline in rates was also supported by lending from cooperative banks in the latter half of the session. "In the evening, cooperative banks were among the major lenders in the call market. Since they do not have access to the SDF facility, they prefer to lend in the market even at relatively lower rates to earn some return on surplus funds," a dealer at a private-sector bank said.

On Tuesday, the RBI conducted a three-day variable rate repo auction for INR 500 billion and accepted all bids of INR 71.90 billion. However, the subscription was poor, despite low liquidity surplus in the banking system and firm overnight rates. This underwhelming subscription at the auction was because most dealers were not keen to borrow funds at 5.26% – the minimum cut-off – for three days. Most banks were happy with the decision as the weighted average tri-party repo rate remained below the RBI's policy repo rate of 5.25%, dealers said. 

Liquidity surplus continued to deteriorate from the highs seen last month. Upcoming goods and services tax outflows around May 20 are expected to further drain liquidity, potentially bringing the surplus below INR 1 trillion. "In view of the expected GST outflows, liquidity could tighten further, and the RBI may need to conduct longer-tenure VRR auctions to ensure adequate liquidity in the system," a dealer at a state-owned bank said. "A seven-day or longer-tenure VRR would likely see better participation compared to shorter-tenure operations," the dealer added.

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.94 trillion Monday, down from INR 2.22 trillion Sunday. The liquidity surplus decreased as banks' cash balances with the RBI rose to INR 7.93 trillion Monday from INR 7.57 trillion Sunday. The surplus contracted further due to the payment for the auction of government securities conducted Friday and VRR reversal Monday worth INR 447.95 billion, dealers said.

The one-day tri-party repo rate ended at 5.05% Tuesday, slightly up from 5.04% Monday. The weighted average rate was 5.13%, slightly down from 5.14% Monday. The volume in the overnight tri-party repo contract was INR 5.45 trillion, up from INR 5.26 trillion Monday. The tri-party rate opened at 5.12%, and traded in the range of 4.93% to 5.19%. 

OUTLOOK 

Wednesday, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks. Liquidity conditions in the banking system are not comfortable enough for banks to lend funds below the repo rate in early trade, dealers said. Dealers expect inflows from the three-day VRR auction won't impact liquidity much as it was poorly subscribed. 

The one-day call money rate is seen in the 4.80-5.30% range Wednesday, whereas the tri-party repo rate is expected to be in the range of 4.90–5.10%, dealers said. The weighted average call rate will be in the range of 5.25-5.30% and that in the tri-party repo market is likely to be in the 5.00-5.10% band Wednesday, dealers said. There are no major inflows and outflows scheduled Tuesday, hence the rates are expected to trade at a similar level, they added.    

CALL RATE

4.75%--Tuesday close for one-day loans

5.35%--Tuesday open for one-day loans

4.75%--Monday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Rates fall as demand for funds eases; VRR gets poor subscription 

MUMBAI – The one-day interbank call money rate eased during the day and moved closer to the Reserve Bank of India's standing deposit facility rate of 5.00% as demand for funds from primary dealerships and banks subsided after they had met their requirements, dealers said. Till early afternoon, a significant portion of the day's volumes had already been traded in the overnight market, largely driven by borrowing from primary dealers and banks in the morning hours, they said. 

At 1415 IST, the one-day call rate was 4.75%, sharply down from Tuesday's opening level of 5.35% and unchanged from Monday's close. The weighted average call rate was 5.28%, down from 5.31% Monday. Trade volume in the market was INR 141.07 billion, largely steady from Monday's volume. For the rest of the day, the call rate is unlikely to inch up towards the repo rate because there are no major outflows, dealers said.

At 1415 IST, the one-day tri-party repo market rate was 5.02%, below the opening level of 5.12% and marginally down from Monday's close of 5.04%. The weighted average tri-party repo rate was 5.15%, up from 5.14% Monday. Trade volume in the contract was INR 4.84 trillion, largely steady from Monday.

The RBI conducted a three-day variable rate repo auction of INR 500 billion earlier in the day and accepted all bids. The bids amounted to just INR 71.90 billion. Demand at the auction was poor as market participants found borrowing in the tri-party repo market cheaper, with the cut-off rate at the auction 5.26% and the tri-party repo rate near the standing deposit facility rate, dealers said. The dealers also attributed the poor subscription to the shorter tenure of the auction. "The VRR was poorly subscribed as participants were reluctant to borrow for a shorter tenure at a higher rate," a dealer at a public-sector bank said.

Dealers said the central bank may need to conduct longer-tenure liquidity operations to improve participation. "RBI should consider conducting at least a seven-day VRR to see better subscription," a dealer at a state-owned bank said. Market participants expect the RBI to announce a longer-tenure VRR auction later in the week, particularly in view of the upcoming goods and services tax outflows around May 20, which is likely to tighten liquidity conditions.

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.94 trillion Monday, down from INR 2.22 trillion Sunday. The liquidity surplus decreased as banks' cash balances with the RBI rose to INR 7.93 trillion Monday from INR 7.57 trillion Sunday. Payment for the auction of government securities Friday and VRR auction reversal Monday worth INR 447.95 billion also drained liquidity.  (Shumaila Firoz)

India Call: Above repo rate on heavy demand, volume jumps over three-fold 

MUMBAI – The one-day interbank call money rate rose Tuesday and was above the Reserve bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships ahead of the auction of state government securities, dealers said. Some private-sector banks were also borrowing due to credit offtake, they said. The volume in the interbank call money market jumped over three-fold to INR 26.43 billion, from INR 7.17 billion at the same time Monday, as the liquidity surplus deteriorated, dealers said.

At 0930 IST, the one-day call rate was 5.35%, sharply up from 4.75% at the end of call money market hours Monday. The weighted average call rate was also 5.34%, up from 5.31% Monday. Trade volume in the call money market was INR 26.34 billion, higher than INR 7.17 billion at the same time Monday. There is more demand for funds from primary dealerships and banks due to low liquidity surplus in the banking system, dealers said. Banks were mainly borrowing to meet their requirements for credit offtake, state bond auction and the fortnight ending Friday, they said.

The one-day tri-party repo rate was 5.17%, up from 5.04% Monday. The weighted average rate for tri-party repos was 5.18%, up from 5.12% Monday. The volume in the tri-party repo market was INR 1.21 trillion, down from INR 1.36 trillion Monday. 

Dealers had expected a low subscription at the three-day VRR auction as the expected cutoff rate was seen higher than the prevailing tri-party repo rate, making the tri-party repo rate a more attractive option for market participants. The RBI held an INR-500-billion VRR auction to infuse liquidity into the banking system. However, the total subscription was INR 71.90 billion at the auction. 

"Participants are unlikely to fully subscribe to the VRR auction as the expected cutoff rate is higher than the TREPS rate, with the TREPS rate (tri-party repo rate) trading near the Standing Deposit Facility rate prompting most to prefer borrowing through the tri-party repo market instead," 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 1.94 trillion Monday, down from INR 2.22 trillion Sunday. The liquidity surplus decreased as banks' cash balances with the RBI rose to INR 7.93 trillion Monday from INR 7.57 trillion Sunday. The payment for the auction of government securities Friday and VRR reversal Monday worth INR 447.95 billion also drained out the liquidity.  (Shumaila Firoz) 

End

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

Edited by Tanima Banerjee

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