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Informist, Friday, May 15, 2026

 

By Shumaila Firoz 

 

MUMBAI – The three-day interbank call money rate rose and ended near the Reserve Bank of India's repo rate of 5.25% due to demand from banks to meet their regulatory requirements and carry adequate surpluses before the weekend, dealers said. However, the last trade in the three-day call contract was struck at 1653 IST, with scattered and negligible activity after 1700 IST in the overnight call money contract maturing Saturday. 

 

On Friday, the three-day call money rate ended at 5.23%, down from 5.30% at open but sharply higher than 4.50% for one-day loans Thursday. The weighted average rate was 5.24%, slightly higher than 5.23% Thursday. The volume in the three-day call contract was INR 140.62 billion, down from INR 154.63 billion for one-day loans Thursday.

 

The overnight call rate has been opening at or above the repo rate levels in recent sessions due to persistent demand for funds in the overnight market at a time when the liquidity surplus in the banking system has declined from the highs seen in April, dealers said. "There is continuous demand in the overnight market due to CD (certificate of deposit) redemptions, credit offtake, and deposits maturing without getting rolled over, which is keeping rates elevated," a dealer at a public sector bank said. 

 

The three-day tri-party repo rate ended at 5.25% Friday, up from 5.20% for one-day Thursday. The tri-party repo market rate spiked due to last-minute demand for funds from banks, dealers said. The weighted average rate was 5.07%, up from 5.05% Thursday. The volume in the tri-party repo contract was INR 5.36 trillion, slightly lower than INR 5.40 trillion Thursday. The tri-party rate opened at 5.12%, and traded in the range of 5.00% to 5.25%. 

 

Liquidity conditions in the banking system have tightened compared to the previous month, prompting the RBI to conduct variable rate repo auctions as a pre-emptive measure to manage any further stress. However, these auctions have seen weak subscription in the past weeks.

 

"VRR cut-offs are higher than TREPS (tri-party repo market) rates, so participants prefer borrowing from the market. Also, the shorter tenure of VRR reduces appetite," a dealer at a public sector bank said. "If the RBI conducts longer-tenor VRRs, say seven days or more, subscription could improve."

 

Dealers expect liquidity conditions to tighten further due to upcoming goods and services tax outflows, estimated at around INR 1.8 trillion to INR 2 trillion. "If the RBI does not come in with VRR around the GST outflows, rates could spike toward the MSF (Marginal Standing Facility) level," a dealer the public sector bank said. After market hours Friday, the central bank announced it would conduct a seven-day, INR 1.00-trillion VRR auction at 0930-1000 IST Monday.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 2.18 trillion Thursday, down from INR 2.23 trillion Wednesday. The liquidity surplus declined due to a slight increase in banks' cash balances with the RBI near the end of the reporting fortnight Friday, dealers said. The daily average cash holdings by banks with the RBI was INR 7.92 trillion for May 1-14, against the requirement of INR 7.88 trillion for the reporting fortnight ending Friday. 

 

Meanwhile, mutual funds are seen sitting on ample cash and actively lending in the tri-party repo segment, reflected in higher trading volumes. "TREPS (tri-party repo market) volumes have increased significantly, earlier it used to close around INR 4.5 trillion, now it is closer to INR 5.5 trillion. Mutual funds are actively deploying funds there," a dealer at a public sector bank said.

 

OUTLOOK

On Saturday, the two-day call money rate is likely to open below the RBI's repo rate of 5.25% as banks have met most of their borrowing requirements on Friday, dealers said. As is usually the case on Saturdays, trade volume is likely to be muted. 

 

The two-day call money rate is seen in the 4.90–5.20% range during the day. Outflows for goods and services tax are scheduled for next week, which could drain banking system liquidity further, dealers said. 

 

CALL RATE

5.23%--Friday close for three-day loans

5.30%--Friday open for three-day loans

4.50%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.27	5.27
3-day	--	--
14-day	5.80	5.79
1-month	5.87	5.86
3-month	6.38	6.37

 

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India Call: Cools to below SDF after banks meet cash reserve, weekend needs

 

MUMBAI - The three-day interbank call money rate fell sharply and cooled to below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as demand for funds from some public sector and small finance banks eased. Early demand came from some public sector and small finance banks on the last day of the reporting fortnight, dealers said. Banks also borrowed for three-day requirements ahead of the weekend, they added. 

 

"Once banks and primary dealerships met their requirements, demand eased and rates came off," a dealer at a public sector bank said. "There were also no major outflows scheduled today." The overnight call rate has been been opening at or above the Reserve Bank of India's repo rate since May 4 as the banking system liquidity has fallen from the previous month, before easing later in the day, dealers said. 

 

At 1630 IST, the three-day call rate was 4.80%, down from Friday's opening level of 5.30% but sharply up from Thursday's close of 4.50% for one-day loans. The weighted average call rate was 5.24%, slightly higher than 5.21% Thursday. Trade volume in the contract was INR 138.57 billion at 1630 IST, down from INR 146.38 billion at the same time Thursday. For the rest of the day, the call rate is likely to trade between 4.60% and 5.30%. 

 

At 1600 IST, the three-day tri-party repo market rate closed at 5.25%, up from Friday's opening level of 5.12% and above Thursday's close of 5.20% for one-day loans. The weighted average tri-party repo rate was 5.08%, up from 5.05% Thursday. Trade volume in the contract was INR 5.36 trillion, down from INR 5.40 trillion Thursday. 

 

Some banks that were falling short on their regulatory requirements, such as smaller lenders, had been borrowing funds earlier even as the overall banking system had met its obligations, dealers said. The daily average cash holdings by banks with the RBI during May 1-14, was INR 7.92 trillion, against the requirement of INR 7.88 trillion for the reporting fortnight ending Friday. 

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 2.18 trillion Thursday, down from INR 2.23 trillion Wednesday. The liquidity surplus decreased due to a slight increase in banks' cash balances with the RBI near the end of the reporting fortnight.

 

Market participants expect liquidity conditions to tighten further in the coming days due to goods and services tax outflows. "GST outflows of around INR 1.8 trillion to INR 2 trillion is going to happen between Monday and Wednesday. Less than 20% of the total expected outflows is expected to happen on Monday, while nearly 50% is likely to be paid on Tuesday," a dealer at a private sector bank said.  (Shumaila Firoz) 

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India Call: Up above repo on fortnight-end, 3-day borrowing demand 

 

MUMBAI – The three-day interbank call money rate rose Friday above the Reserve Bank of India's repo rate of 5.25%. The rise in call rate was due to low surplus liquidity in the banking system and demand for funds from banks on the last day of the reporting fortnight Friday, dealers said. Primary dealers were more active ahead of Friday's gilt auction, while some banks also stepped up borrowing to meet their cash requirements for three days, dealers said. 

 

"The three-day maturity of the VRR (variable rate repo) auction conducted Tuesday also put upward pressure on rates. Additionally, today (Friday) being the last day of the reporting fortnight and a Friday led banks to borrow for three days, which pushed rates higher at the open," a dealer at a public-sector bank said. 

 

At 0930 IST, the three-day call rate was 5.30%, sharply up from 4.50% Thursday for one-day loans. The weighted average call rate was also 5.30%, slightly up from 5.29% Thursday. Trade volume in the call money market was INR 2.00 billion, lower than INR 10.99 billion at the same time Thursday. The call money rate is likely to move near the repo rate due to the requirement for funds from some banks to maintain the cash reserve ratio for the fortnight ending and also three-day cash needs.  

 

The three-day tri-party repo rate was 5.06%, sharply down from 5.20% Thursday one-day loans. The weighted average rate for tri-party repos was 5.09%, unchanged Thursday. The volume in the tri-party repo market was INR 1.50 trillion, down from INR 1.57 trillion Thursday.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 2.18 trillion Thursday, down from INR 2.23 trillion Wednesday. The liquidity surplus decreased as banks' cash balances with the RBI rose to INR 7.67 trillion Thursday from INR 7.63 trillion Wednesday.  (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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