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Informist, Thursday, May 21, 2026 

 

By Shumaila Firoz 

 

MUMBAI – The one-day interbank call money rate on Thursday ended at its highest level for an overnight tenure in nearly a month. The rate ended above the Reserve Bank of India's repo rate of 5.25% due to a lower liquidity surplus in the banking system and outflows from banks related to the goods and services tax payments, dealers said. The weighted average call rate was also above the RBI's repo rate. 

 

The one-day call money rate ended at 5.27% Thursday, down from 5.35% at open and sharply up from 4.75% at close Wednesday. The weighted average rate was 5.27%, up from 5.23% Wednesday. The volume in the one-day call market was INR 186.75 billion, up from INR 185.12 billion Wednesday. The call money rate ranged between 4.60% and 5.35% during the day.

 

The one-day tri-party repo rate ended at 5.30% Thursday, sharply up from 5.07% Wednesday. The weighted average rate was 5.20%, up from 5.15% Wednesday. The volume in the tri-party repo market was INR 5.25 trillion, up from INR 5.16 trillion Wednesday. The tri-party rate opened at 5.20% and moved within a range of 5.10% and 5.50%. 

 

Tri-party repo rates also traded in the higher range during the day as liquidity surplus in the banking system has fallen from the levels seen last month, dealers said. The banks were cautious and maintained higher cash buffers due to GST-related outflows, which reduced their lending appetite in the market, they added. "Given most of the GST outflows today (Thursday), lenders are fewer and the liquidity surplus in the banking system is already low, so banks are likely maintaining higher cash buffers due to these outflows," a dealer at a public-sector bank said. 

 

Typically, rates soften after early trade as funding needs are met. However, Thursday rates rose in the tri-party repo market in the final minutes of trading amid thin volumes. Dealers said such a rise in rates is not unusual when volumes are thin. "Volumes were low in the last trades, but whenever the volume is low, rates spike," a dealer at another state-owned bank said. 

 

Market participants said GST outflows continued to weigh on liquidity. Dealers estimate that GST-related outflows on Wednesday were around INR 200 billion to INR 300 billion, and their impact was visible today. While there is some uncertainty around the exact amount, dealers said that outflows of more than INR 500 billion took place Thursday, with some outflows likely on Friday as well. 

 

Dealers expect the RBI to remain proactive in ensuring comfortable liquidity in the banking system. After conducting an overnight variable rate repo auction Thursday, some participants believe further action may follow. "Since the RBI announced a VRR overnight yesterday (Wednesday) and conducted the auction today, it may come up with another VRR of around INR 1.0 trillion to INR 1.25 trillion for rollover," a dealer at a private-sector bank said. The RBI conducted an overnight VRR auction Thursday of INR 1.25 trillion and accepted all bids worth INR 253.60 billion. VRR was poorly subscribed because tri-party repo rates were lower in early trade than the VRR auction cut-off of 5.26%, dealers said. 

 

Meanwhile, the RBI's announcement of a three-year dollar-rupee buy-sell swap auction worth $5 billion Tuesday is expected to provide some liquidity support, though the impact may be modest as the amount is not large. "The amount is not very large, but it will add some liquidity and may help cool down rates slightly," the dealer at the first public-sector bank said. 

 

Dealers added that the combined effect of the swap settlement and expected month-end government spending could improve system liquidity. "With month-end spending and the swap settlement coming together, liquidity should improve and rates may cool down, with weighted average rates in both markets moving below the repo rate," the dealer said. 

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.29 trillion Wednesday, down from INR 1.51 trillion Tuesday. The liquidity surplus decreased because of GST-related outflows. The reversal of the overnight VRR auction on Friday is also likely to drain liquidity.

 

OUTLOOK

Friday, the three-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to low liquidity surplus in the banking system and early demand for funds from primary dealerships and some banks for GST-related outflows. Dealers expect the liquidity surplus for Thursday to fall below INR 1 trillion after payment for the GST outflows, the lowest since late March.  

 

After market hours Thursday, the RBI announced it would conduct a three-day VRR auction for INR 1.00 trillion at 0930-1000 IST Friday. The auction is likely to be well subscribed if the tri-party repo rate is on the higher side. This will help cap money market rates near the RBI's repo rate, they said.

 

Dealers expect the call rate to be around 4.80-5.35% during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.25%. The weighted average call rate is expected to be in the range of 5.25-5.35% for Friday, while the weighted average tri-party repo market rate is likely to be in the range of 5.10-5.25%, they said.  

 

CALL RATE

5.27--Thursday close for one-day loans

5.35%--Thursday open for one-day loans

4.75%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.33	5.28
3-day	--	--
14-day	5.85	5.86
1-month	5.92	5.91
3-month	6.46	6.42

 

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India Call: Slips below RBI's SDF rate; GST outflows weigh on liquidity

 

MUMBAI – The one-day interbank call money rate slipped below the Reserve Bank of India's standing deposit facility rate of 5.00% Thursday as demand for funds eased after banks and primary dealerships met their immediate cash requirements, dealers said. However, the weighted average call rate remained above the RBI's repo rate of 5.25% due to persistent funding needs amid ongoing goods and services tax outflows, they said. 

 

At 1430 IST, the one-day call rate was 4.75%, down from Thursday's opening level of 5.35% but unchanged from Wednesday's close. The weighted average call rate was 5.30%, up from 5.25% Wednesday. The trade volume was INR 160.25 billion, up from INR 148.67 billion at the same time Wednesday. For the rest of the day, the call rate is likely to move between 4.60% and 5.35%. 

 

Dealers expect outflows of INR 1.8 trillion to INR 2.0 trillion for GST payments between Tuesday and Thursday. Liquidity conditions in the banking system tightened following GST-related outflows, with market participants estimating sizeable payments.

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.29 trillion Wednesday, down from INR 1.51 trillion Tuesday. The liquidity surplus decreased because of GST-related outflows. 

 

"Yesterday (Wednesday), GST outflow would have been around INR 200 billion to INR 300 billion, and we are seeing its impact on liquidity today," a dealer at a public-sector bank said. Some dealers are not sure about the exact amount of outflow. 

 

"Today, we are expecting more than INR 500 billion outflow, but we will get to know the exact figure later," the dealer said. "Today our bank will also do the payment for the GST outflow." 

 

After the GST-related payments, liquidity in the banking system is expected to drop below INR 1 trillion, dealers said.

 

At 1430 IST, the one-day tri-party repo market rate was 5.17%, down from Thursday's opening level of 5.20% and up from Wednesday's close of 5.07%. The weighted average tri-party repo rate was 5.20%, up from 5.16% Wednesday. Trade volume was INR 4.67 trillion, up from INR 4.59 trillion Wednesday. 

 

"TREPS rates are high because there are GST outflows today. Lenders may be fewer and liquidity surplus in the banking system is already low, so banks are trying to maintain cash cushions," a dealer at a private-sector bank said.

 

The RBI has conducted an overnight variable rate repo auction of INR 1.25 trillion and accepted all bids worth INR 253.60 billion. VRR was poorly subscribed because tri-party repo rates were lower in early trade than the expected cutoff, dealers said. Market participants are also watching the RBI's liquidity operations closely. After conducting an overnight VRR auction Thursday, some dealers expect a follow-up operation. "RBI announced an overnight VRR yesterday (Wednesday) and conducted the auction today (Thursday) and there is a possibility that the RBI may come up with another VRR of around INR 1 trillion to INR 1.25 trillion for rollover," a dealer at a private-sector bank said.  (Shumaila Firoz) 

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India Call: Up on outflows for GST, low liquidity; VRR might cap rates

 

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 demand for funds amid outflows for goods and services tax payments. Early demand for funds from primary dealerships and low liquidity surplus also kept the call money rate and tri-party repo rate higher, dealers said.

 

At 0930 IST, the one-day call rate was 5.35%, sharply higher than 4.75% Wednesday. The weighted average call rate was also 5.35%, up from 5.30% Wednesday. The trade volume in the call money market was INR 11.75 billion, lower than INR 43.63 billion at the same time Wednesday.

 

At 0930 IST, the one-day tri-party repo rate was 5.21%, up from 5.07% Wednesday. The weighted average tri-party repo rate was 5.19%, up from 5.15% Wednesday. The volume in the tri-party repo market at the same time was INR 1.76 trillion, up from INR 1.46 trillion Wednesday. The volume in the tri-party repo market increased Thursday as banks borrowed in the market ahead of the VRR auction. "Banks are currently borrowing in TREPS (tri-party repo market) as rate here is lower than that in VRR (variable rate repo auction, which is 5.26%)," a dealer at a state-owned bank said.  

 

The net liquidity absorbed by the RBI--an indicator of surplus liquidity in the banking system--was INR 1.29 trillion Wednesday, down from INR 1.51 trillion Tuesday. The liquidity surplus decreased because of GST-related outflows. Dealers said around INR 400 billion outflows for GST payments were recorded Wednesday. They see outflows of INR 1.8 trillion to INR 2 trillion for GST payments this week. 

 

To support banking system liquidity, the RBI conducted an overnight VRR auction for INR 1.25 trillion between 0930 IST and 1000 IST. Dealers expect the VRR auction to cap rates in the overnight market. "Auction subscription is likely to be below 50%, as TREPS (tri-party repo) rate is still below RBI's repo rate, participants may prefer the TREPS market," a dealer at another state-owned bank said.  (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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