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Informist, Monday, May 18, 2026

 

By Shumaila Firoz 

 

MUMBAI – The one-day interbank call money rate ended near the Reserve Bank of India's repo rate of 5.25% Monday. Rates rose slightly near the end of trade after falling below the Standing Deposit Facility rate, driven by demand for funds from some banks following the closure of the tri-party repo market as surplus liquidity in the banking system fell, dealers said. 

 

Monday, the one-day call money rate ended at 5.18%, down from 5.25% at the open but sharply higher than 4.75% for two-day loans Saturday. The weighted average rate was 5.18%, higher than 4.94% Saturday. The volume in the one-day call contract was INR 173.03 billion, up from INR 15.01 billion for two-day loans Saturday. Trade volumes are typically muted on Saturdays as banks meet their weekend funding requirements on Friday. 

 

The one-day tri-party repo rate ended at 4.80% Monday, down from 5.10% for two-day loans Saturday. The weighted average rate was 5.07%, up from 5.00% Saturday. The volume in the tri-party repo contract was INR 5.61 trillion, up from INR 146.79 billion Saturday. The tri-party rate opened at 5.08% and traded in 4.76% to 5.25% range. 

 

The call rate opened at the repo rate, lower than in earlier sessions when it had opened above it, reflecting the RBI's announcement of a seven-day variable rate repo auction worth INR 1 trillion for 0930-1000 IST Monday. Banks had also parked excess funds in their cash balances with the central bank at the beginning of the reporting fortnight while maintaining enough in the Standing Deposit Facility to meet daily needs, dealers said. 

 

"Rates opened lower today as the VRR auction announcement itself eased sentiment and funding demand is usually not very strong at the start of the fortnight," a dealer at a public-sector bank said.

 

Dealers said the VRR auction did not see strong demand as liquidity in the banking system is currently neither in significant surplus nor in deficit. Participants preferred cheaper borrowing options earlier in the day, including the tri-party repo market, they said. The RBI accepted all bids worth INR 160.05 billion at the auction.

 

"There is no clear liquidity surplus right now, but at the same time, there is no deficit either, so appetite for VRR was limited," a dealer at a private-sector bank said. 

 

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 1.42 trillion Sunday, down from INR 1.99 trillion Saturday. This was the lowest surplus since Mar. 29. Moreover, the payment of INR 320 billion for the government bond auction was scheduled Monday, with around INR 54 billion of coupon payments partially offsetting the outflow.

 

Banks' cash balances with the RBI rose to INR 8.67 trillion Sunday from INR 8.11 trillion Saturday, pulling down the surplus. Banks maintained cash with the RBI in excess of regulatory requirements for the reporting period ending May 31 after stocking up on funds at the end of the previous reporting fortnight on Friday, dealers said.

 

"Banks have maintained more than the required CRR (cash reserve ratio) for now, as a precaution ahead of expected GST outflows," the private-sector bank's dealer said. "They are building buffers at this stage so they don't face any liquidity pressure once large GST-related outflows begin." 

 

Dealers said demand for funds is likely to increase in the coming days as goods and services tax-related outflows pick up, with total outflows estimated at around INR 1.8-2.0 trillion. This is likely to require further VRR auctions, which will be better subscribed by banks as they will need funds, dealers said. Instead of the current surplus, the RBI may have to inject around INR 1 trillion on a net basis by Thursday, a proxy for a liquidity deficit, dealers said.

 

OUTLOOK

Tuesday, 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. Goods and services payments may begin Tuesday, dealers said.

 

The one-day call money rate is seen in the 4.80–5.30% range Tuesday. 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

5.18%--Monday close for one-day loans

5.25%--Monday open for one-day loans

4.75%--Saturday close for two-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.23	5.27
3-day	--	--
14-day	5.80	5.80
1-month	5.87	5.87
3-month	6.38	6.38

 

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India Call: Below RBI's SDF rate, demand for funds eases post VRR auction

 

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 banks and primary dealers subsided after they met their requirements, dealers said. Money market rates eased after the central bank's seven-day, INR 1-trillion variable rate repo auction at 0930-1000 IST. 

 

At 1330 IST, the one-day call rate was 4.95%, down from Monday's opening level of 5.25% but up from Saturday's close of 4.75% for two-day loans. The weighted average call rate was 5.21%, up from 4.90% Saturday. Trade volume in the contract was INR 118.09 billion, up from INR 3.09 billion at the same time Saturday. For the rest of the day, the call rate is likely to trade between 4.60% and 5.25%. 

 

At 1330 IST, the one-day tri-party repo market rate was at 5.10%, up from Monday's opening level of 5.08% and unchanged from Saturday's close for two-day loans. The weighted average tri-party repo rate was 5.11%, up from 5.00% Saturday. Trade volume in the contract was INR 4.41 trillion, up from INR 63.81 billion Saturday. 

 

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 1.42 trillion Sunday, down from INR 1.99 trillion Saturday. Cash balances with the RBI were INR 8.67 trillion Sunday, up from INR 8.11 trillion Saturday. Banks are maintaining excess cash reserve ratio, which has led to a divergence in liquidity conditions compared with earlier levels. Dealers said this is typical behaviour at the start of a reporting fortnight, when banks tend to hold surplus reserves and gradually reduce them later. 

 

"Banks are currently maintaining CRR above the required average as a precaution, as liquidity could tighten after GST (goods and services tax) outflows this week," a dealer at a public sector bank. This is also a usual trend that at the start of a fortnight banks maintain higher than required CRR, just to maintain lower (cash reserve ratio) balances later." 

 

Earlier in the day, the RBI conducted a seven-day variable rate repo auction of INR 1 trillion. Demand at the auction was weak, with bids totalling only INR 160.50 billion. Dealers said market participants preferred borrowing in the tri-party repo market, where rates were closer to the SDF rate, making it a cheaper option compared to the VRR cut-off rate of 5.26%.

 

A dealer said the timing of the VRR auction was premature, adding that such operations typically see stronger demand closer to Wednesday-Thursday, when liquidity tightens due to GST-related outflows. "At this stage, there is little incentive to borrow at a higher rate when tri-party repo rates are near the SDF," a dealer at a private sector bank said.

 

Dealers expect the impact of GST outflows to become visible after Thursday, potentially leading to a liquidity deficit of INR 1 trillion compared with current levels. Based on liquidity conditions, the RBI may conduct another VRR auction of INR 500 billion to INR 1 trillion to manage system liquidity, they added.  (Shumaila Firoz) 

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India Call: At repo rate; up on early demand for funds ahead of GST outflows 

 

MUMBAI – The one-day interbank call money rate rose Monday and was at the Reserve bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks ahead of the goods and services tax outflows dealers said. However, the rate is expected to fall later in the day as the RBI conducted a seven-day variable rate repo auction for INR 1 trillion between 0930 IST and 1000 IST.

 

"Banks were borrowing as GST outflows are set to begin Monday. Demand for funds remained elevated," a dealer at a private-sector bank said. Outflows of INR 1.5 trillion to INR 2 trillion for goods and services tax payment are expected to begin on Monday, but the majority of the payment is likely to take place on Wednesday, the dealer said.

 

At 0937 IST, the one-day call rate was 5.25%, up from 4.75% for two-day loans Saturday. The weighted average call rate was 5.25%, up from 4.95% Saturday. Trade volume in the call money market was INR 33.49 billion. At 0937 IST, the one-day tri-party repo rate was 5.09%, down from 5.10% Saturday for two-day loans. The weighted average rate was 5.09%, up from 5.00% Saturday. The volume in the tri-party repo market was INR 2.43 trillion.

 

Dealers said the central bank's announcement of a VRR auction, after market hours on Friday, was in line with expectations, as liquidity in the banking system has been steadily tightening. Market participants said the move was linked to GST outflows, which are likely to absorb liquidity from the banking system.

 

"RBI's VRR auction announcement was on expected lines given the ongoing decline in liquidity, and is seen as a response to GST outflows from Monday that are likely to drain funds and tighten system liquidity," a dealer at a private-sector bank said.

 

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system – was INR 2.48 trillion Friday, up from INR 2.18 trillion Thursday. Cash balances with the RBI were INR 7.65 trillion Friday from INR 7.67 trillion Thursday.  (Shumaila Firoz) 

 

End

 

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

 

Edited by Saji George Titus

 

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