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Informist, Thursday, May 14, 2026

 

By Shumaila Firoz 

 

MUMBAI – The interbank call money rate for one-day loans ended at its lowest level in nearly a month, even though the liquidity surplus in the banking system remained low. The rate also ended below the Reserve Bank of India's standing deposit facility rate of 5.00% on weaker demand for funds after banks and primary dealers met their requirements early in the day, dealers said. However, the weighted average rate was near the RBI's repo rate on demand nearing the end of the reporting fortnight.

 

A mixture of public and private sector banks continued to borrow to meet their cash reserve ratio requirements for the reporting fortnight ending Friday, but the bulk of their funding needs was met in the first half, which pulled rates lower as the session progressed, dealers said.

 

Rates have been opening at or above the RBI's repo rate since the start of the month, reflecting firm demand for funds at the beginning of the day. Pressure on rates in the overnight money market was partly attributed to borrowing by oil marketing companies through commercial papers at relatively higher rates, which attracted investments from banks. This has led to lack of funds in the market, dealers said.

 

"Oil companies are in need of funds as crude oil prices were low before the war but have risen sharply after that," a dealer at a private sector bank said. "They are increasingly issuing commercial paper at higher interest rates, which is leading to an upward movement in call money rates." a dealer at another private sector bank said. 

 

However, "the key reason behind higher opening rates is a moderation in liquidity surplus in the banking system," a dealer at a public sector bank said. 

 

On Thursday, the one-day call money rate ended at 4.50%, sharply lower than 5.20% Wednesday. The weighted average rate was 5.21%, down from 5.24% Wednesday. The volume in the overnight market was INR 154.63 billion, down from INR 157.71 billion Wednesday. 

 

The one-day tri-party repo rate ended at 5.20% Thursday, sharply higher than 5.05% Wednesday. The tri-party repo market rate spiked due to last-minute demand for funds, dealers said. The weighted average rate was 5.05%, down from 5.08% Wednesday. The volume in the tri-party repo market was INR 5.40 trillion, slightly down from INR 5.54 trillion Wednesday. The tri-party rate opened at 5.05%, and traded in the range of 4.96% to 5.20%. 

 

Market participants expect the RBI to conduct a VRR auction next week in view of goods and services tax outflows starting Monday. "The expected quantum could be around INR 1.0 trillion – INR 1.5 trillion, with a likely tenure of seven days," a dealer at another public sector bank said.

 

"It is basically an indication from the central bank that it is present in the market and ready to provide liquidity if required. If the RBI does not conduct VRR auction during the GST outflow period, call money rates could even rise above the marginal standing facility rate," a dealer at another private sector bank said.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 2.23 trillion Wednesday, slightly lower than INR 2.28 trillion Tuesday. Cash balance with the RBI was INR 7.63 trillion Wednesday, unchanged from Tuesday. 

 

OUTLOOK 

On Friday, the three-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 ahead of the weekly gilt auction, and some banks maintaining their cash reserve ratio requirements for the reporting fortnight ending Friday, dealers said. Some banks will borrow more to fulfil their three-day requirements, they said. 

 

The three-day call money rate is seen in the range of 4.80-5.30% Friday, whereas the tri-party repo rate is expected to be in the range of 4.90–5.15%, dealers said. The weighted average call rate will be in the range of 5.20-5.30% and in the tri-party repo market, it is likely to be in the 5.00-5.20?nd, dealers said. 

 

CALL RATE

4.50%--Thursday close for one-day loans

5.30%--Thursday open for one-day loans

5.20%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.27	5.31
3-day	--	--
14-day	5.79	5.80
1-month	5.86	5.88
3-month	6.37	6.38

 

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India Call: Below SDF rate; CP issues by oil cos at high rates limit fall 

 

MUMBAI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Thursday after opening above the repo rate, as early demand for funds from banks and primary dealership was largely met, dealers said. Some public and private sector banks continued to borrow funds in the money market to meet their cash reserve ratio requirements for the reporting fortnight ending Friday, they said. 

 

Rates have been opening at or above the RBI's repo rate since the start of this month, reflecting firm demand for funds at the start of the session, they said. Pressure on rates in the interbank call money market is partly due to oil marketing companies borrowing through commercial papers at higher rates, attracting investment from banks, which has created lack of funds in market, dealers said. 

 

"Oil companies are in need of funds as crude oil prices were low before the war but have risen sharply after that," a dealer at a private sector bank said. "They are increasingly issuing commercial paper at higher interest rates, which is leading to an upward movement in call money rates." 

 

On Tuesday, Hindustan Petroleum Corp. raised INR 5 billion through a three-month commercial paper at 6.78%, while Indian Oil Corp. Ltd. mopped up INR 17 billion through a one-month CP at 6.26%. ONGC Petro Additions Ltd. raised INR 4 billion through a CP maturing on Aug. 10 at 6.93%.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 2.23 trillion Wednesday, slightly lower than INR 2.28 trillion Tuesday. Cash balance with the RBI was INR 7.63 trillion Wednesday, unchanged from Tuesday. 

 

The rupee's depreciation over the long term could lead to tighter liquidity in the banking system, which might push up call money rates, as the RBI is likely to intervene to stabilise the currency, dealers said. They added that if the rupee depreciates over the long term, the RBI might step in by selling dollars, which would suck out rupee liquidity from the system. This could tighten liquidity conditions and push up call money rates.

 

At 1430 IST, the one-day call rate was 5.00%, lower than Thursday's opening level of 5.30% and Wednesday's close of 5.20%. The weighted average call rate was 5.24%, down from 5.27% Wednesday. Trade volume in the market was INR 131.68 billion, down from Wednesday's volume of INR 142.42 billion. For the rest of the day, the call rate is likely to trade between 4.60% and 5.30%.

 

At 1430 IST, the one-day tri-party repo market rate was 5.00%, below the opening level of 5.05% and also down from Wednesday's close of 5.05%. The weighted average tri-party repo rate was 5.05%, down from 5.09% Wednesday. Trade volume in the contract was INR 4.73 trillion, down INR 4.99 trillion on Wednesday.  (Shumaila Firoz) 

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India Call: Up on low liquidity surplus, demand from banks, PDs 

 

MUMBAI – The one-day interbank call money rate rose Thursday and was above the Reserve bank of India's repo rate of 5.25% due to low liquidity surplus in the banking system and early demand for funds from primary dealerships, dealers said. Some banks also borrowed to maintain their cash reserves ratio with the reporting fortnight approaching Friday, they said. The volume in the call money market was down due to the high rate, dealers said. 

 

"Demand in the call market is elevated as banks are borrowing to meet their fortnight-end requirements and disbursal needs," a dealer at a private-sector bank said. 

 

Trade volume in the call money market was INR 10.99 billion at 0930 IST, lower than INR 29.99 billion at the same time Wednesday. "Volume is low as rate is up in the call money market compared to TREPS (tri-party repo) market," a dealer at a state-owned bank said. "I think volume might increase in the call market when rate goes down." At 0930 IST, the one-day call rate was 5.30%, down from 5.20% Wednesday. The weighted average call rate was 5.30%, down from 5.32% Wednesday.  

 

At 0940 IST, the one-day tri-party repo rate was 5.06%, up from 4.99% Wednesday. The weighted average rate for tri-party repo was 5.08%, down from 5.12% Wednesday. The volume in the tri-party repo market was INR 2.26 trillion, slightly down from INR 2.58 trillion Wednesday. However, during the day, the volume is expected to rise to almost Wednesday's levels as banks will borrow more in the tri-party repo market owing to lower rates as against the interbank call money rate, dealers said. 

 

Mutual funds, with ample cash, are expected to lend actively in the tri-party repo market, dealers said. "TREPS (tri-party repo) rates are holding well as mutual funds are flush with cash and actively lending, with volumes already reaching around INR 2.26 trillion early in the day," 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 2.23 trillion Wednesday, slightly down from INR 2.28 trillion Tuesday. Cash balances with the RBI was INR 7.63 trillion Wednesday, unchanged from Tuesday. (Shumaila Firoz)

 

End

 

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

 

Edited by Avishek Dutta

 

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