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Informist, Wednesday, May 20, 2026

 

By Shumaila Firoz 

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility of 5.00% Wednesday even as the surplus liquidity in the banking system fell. The rate softened after primary dealerships met demand for funds in the first half of the day. Banks increased their borrowing and some banks avoided lending due to goods and services tax outflows.

 

The interbank call money rate rose briefly after the tri-party repo market closed at 1600 IST, but the last transaction was a small trade of INR 60 million below the SDF rate. The one-day call money rate ended at 4.75% Wednesday, sharply down from 5.30% at the open, but slightly higher than 4.70% at close on Tuesday. The weighted average rate was 5.23%, up from 5.21% Tuesday. The volume in the one-day call contract was INR 185.12 billion, up from INR 150.11 billion Tuesday. The call money rate traded was between 4.50% and 5.30% during the day. 

 

Since the start of May, interbank call money market opening rates have remained elevated, reflecting persistent demand for funds. "There is demand in the market, with banks mainly borrowing due to credit offtake, CD (certificate of deposit) maturities, and large outflows such as GST," a dealer at a public-sector bank said. 

 

Most banks estimated that around INR 800 billion of outflows for GST took place Wednesday, with the remaining expected Thursday. However, estimates varied, with some putting the outflows from the banking system as low as INR 400 billion. Total GST payment outflow of INR 1.8 trillion to INR 2.0 trillion is expected this week, draining system liquidity.

 

The net liquidity absorbed by the RBI – an indicator of surplus liquidity in the banking system - was INR 1.51 trillion Tuesday, down from INR 1.82 trillion Monday. The liquidity surplus fell as banks increased their cash balances with the RBI to INR 8.08 trillion Tuesday from INR 7.88 trillion Monday, dealers said. Though the data did not show notable GST outflows, some traders estimated that between INR 200 billion and INR 600 billion in such payments took place on Tuesday. 

 

The RBI conducted a five-day variable rate repo auction worth INR 1.5 trillion, but the response was weak, with only INR 164.35 billion in bids accepted. Banks largely turned to the tri-party repo market for funding, as rates there were relatively lower, reducing demand for the RBI's tool at the higher 5.26% minimum cut-off rate, dealers said. The tri-party repo rate rose from near the SDF rate to above the repo rate due to demand from banks, before cooling. 

 

At 1600 IST, the one-day tri-party repo market rate ended at 5.07%. The contract traded in a range of 4.90-5.27% Wednesday. The closing level was down from Wednesday's opening level of 5.13% and from Tuesday's close of 5.09%. The weighted-average tri-party repo rate was 5.15%, up from 5.07% on Tuesday. The trade volume was INR 5.16 trillion, down from INR 5.36 trillion Tuesday.

 

OUTLOOK

Thursday, 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, with banks also likely to borrow to pay the GST to the government. Some banks expect the liquidity surplus for Wednesday to fall to under INR 1 trillion, the lowest since late March, with the settlement of an INR 201-billion state bond auction also draining liquidity.

 

After market hours Wednesday, the RBI announced it would conduct an overnight VRR auction for INR 1.25 trillion at 0930-1000 IST Thursday. The auction is likely to be well subscribed, as liquidity in the banking system is expected to be the lowest in seven weeks, dealers said. This will help cap money market rates near the policy repo rate, they said.

 

The one-day call money rate is seen in the 4.90–5.35% range Thursday. The tri-party repo rate is expected to be in the range of 4.90–5.20%, dealers said. The weighted average call rate will be in the range of 5.20-5.35% and in the tri-party repo market, it is likely to be in the 5.10-5.20?nd, they said.

 

CALL RATE

4.75%--Wednesday close for one-day loans

5.30%--Wednesday open for one-day loans

4.70%--Tuesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	WEDNESDAY	TUESDAY
Overnight	5.28	5.27
3-day	--	--
14-day	5.86	5.84
1-month	5.91	5.90
3-month	6.42	6.40

 

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India Call: At repo rate on banks' demand for funds amid GST outflows

 

MUMBAI – The one-day interbank call money rate fell slightly but was at the Reserve Bank of India's policy repo rate of 5.25% Wednesday as banks increased their borrowing to fund outflows for goods and services tax payments, dealers said. The weighted average call rate was also at the repo rate.

 

Call money rates had fallen sharply after primary dealers met their need for funds early in the day, and banks preferred to borrow in the tri-party repo market. The interbank market rates rose after the broader market, which includes mutual funds usually on the lending side, closed at 1600 IST.

 

At 1615 IST, the one-day call rate was 5.25%, down from Wednesday's opening level of 5.30% but sharply up from Tuesday's close of 4.70%. The weighted average call rate was 5.25%, up from 5.21% Tuesday. At 1430 IST, the trade volume was INR 171.24 billion, up from INR 141.76 billion at the same time Tuesday. For the rest of the day, the call rate is likely to move between 4.60% and 5.30%. 

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.51 trillion Tuesday, down from INR 1.82 trillion Monday. Some dealers said outflows of INR 200 billion to INR 600 billion had already taken place for GST payments Tuesday. However, a rise in cash balances with the RBI suggested that no major outflows took place on account of GST payments Tuesday, a dealer at a private-sector bank said.

 

The consensus view was that GST payments amounting to INR 800 billion took place Wednesday, draining rupee liquidity from the banking system. The remainder of the total outflows of INR 1.8 trillion to INR 2.0 trillion is likely to be completed by Thursday, dealers said.

 

The RBI conducted a five-day variable rate repo auction of INR 1.50 trillion at 0930-1000 IST but got bids for only INR 164.35 billion. The central bank accepted all the bids at a cut-off rate of 5.26%. The availability of cheap funding in the tri-party repo market prompted banks to borrow there in early trade, which led to the rate inching up above the repo rate of 5.25% briefly, they said.

 

"There were fewer lenders and more borrowers in the TREPS (tri-party repo) market, which pushed rates higher," a dealer at a public-sector bank said. "RBI's intervention (in the foreign exchange market) also drained rupee liquidity, reducing the availability of funds for lending." The central bank was seen selling dollars in the spot market to curb the rupee's depreciation over the last few sessions, with the domestic unit hitting a record low of 96.96 a dollar Wednesday. 

 

At 1600 IST, the one-day tri-party repo market rate ended at 5.07%, down from Wednesday's opening level of 5.13% and also down from Tuesday's close of 5.09%. The weighted average tri-party repo rate was 5.15%, up from 5.07% Tuesday. The trade volume was INR 5.16 trillion, down from INR 5.36 trillion Tuesday. The contract traded in a range of 4.90-5.27% Wednesday.

 

The central bank may come up with another variable rate repo auction Thursday despite the disappointing subscription at such auctions held on Monday and Wednesday, dealers said. Traders believe the RBI wants to keep the weighted average call rate near the repo rate and would not prefer to tighten monetary conditions further. To do this, it may Wednesday announce a VRR auction for Thursday proactively for up to INR 1.5 trillion, some dealers said. However, others said the RBI would wait to see whether the weighted average call rate would rise above 5.25% Thursday before taking further liquidity steps.

 

"RBI does not want rates to move towards the MSF (marginal standing facility) level and will act to keep them aligned within the corridor," a dealer at the public-sector bank said.  (Shumaila Firoz)

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India Call: Up on low liquidity surplus, demand for funds amid GST outflows

 

MUMBAI – The one-day interbank call money rate rose Wednesday and was above the Reserve Bank of India's repo rate of 5.25% as liquidity surplus in the banking system declined and due to demand for funds amid outflows for payment of goods and services tax, dealers said. However, the rate is expected to cool later in the day as the RBI conducted a five-day variable rate repo auction for INR 1.50 trillion between 0930 IST and 1000 IST.

 

"Some banks are borrowing as most of the GST-related outflows are expected to take place today (Wednesday) and tomorrow (Thursday)," a dealer at a state-owned bank said. Dealers expect outflows of INR 1.8 trillion to INR 2 trillion for GST payments this week. 

 

At 0924 IST, the one-day call rate was 5.30%, sharply higher than 4.70% Tuesday. The weighted average call rate was also 5.30%, up from 5.21% Tuesday. At 0930 IST, the trade volume in the call money market was INR 43.60 billion, slightly lower than INR 43.64 billion at the same time Tuesday. At 0924 IST, the one-day tri-party repo rate was 5.15%, up from 5.09% Tuesday. The weighted average rate for tri-party repos was 5.15%, up from 5.07% Tuesday. At 0930 IST, the volume in the tri-party repo market was INR 1.46 trillion, down from INR 1.82 trillion Tuesday.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.51 trillion Tuesday, down from INR 1.82 trillion Monday. The liquidity surplus fell as banks increased their cash balances with the RBI to INR 8.08 trillion Tuesday from INR 7.88 trillion Monday.

 

Market participants said the call money rate is likely to fall below the RBI's repo rate once the early demand for funds has been met. Inflows from the RBI's VRR auction are also likely to keep the call rate lower during the day. "Subscription to the auction is likely to be around 50%, as participants may prefer the TREPS (tri-party repo) market due to relatively lower rates," a dealer at a private sector bank said.

 

According to the median of an Informist poll of 16 market participants, subscription at the five-day VRR auction for INR 1.5 trillion on Wednesday is expected to be INR 450 billion at a cut-off of 5.26%.  (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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