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Informist, Monday, May 25, 2026

 

By Aaryan Khanna

 

NEW DELHI – The overnight interbank call money rate ended above the Reserve Bank of India's repo rate of 5.25% as banks borrowed funds to meet credit demand amid tight liquidity conditions, dealers said. However, market stress cooled as there were no major outflows during the day, after goods and services tax payments last week drained nearly INR 2 trillion from the banking system, they said. 

 

The one-day call money rate ended at 5.35% Friday, similar to 5.37% for three-day loans Friday. The call money rate had opened at 5.45% before slumping to 4.60% in the afternoon. The weighted average call rate was 5.36% Monday, similar to 5.37% Friday. The volume in the overnight call contract was INR 163.33 billion, down from INR 199.54 billion for three-day loans Friday.

 

The one-day tri-party repo rate ended at 5.09%, down from 5.24% on Friday. The weighted average rate was 5.21%, down from 5.26% Friday. The volume in the most-traded tri-party repo contract was flat from the previous day at INR 5.34 trillion Monday. During the day, tri-party repo rate traded in the 4.90-5.30% range.

 

The RBI's net liquidity absorbed, which is an indication of the surplus liquidity in the banking system, was INR 552.86 billion Sunday, up from INR 518.21 billion Saturday, and INR 549.77 billion Friday. Saturday's figure was the lowest in nearly two months. There were no major inflows or outflows Monday as some coupon payments and bond redemptions helped offset the drain from the government bond auction's settlement, dealers said. Since GST outflows ceased, the volumes in the call money market eased.

 

Banks that did not roll over the full amount they had funded through prior variable-rate repo auctions at Monday's auction still had a cash mismatch, dealers said. The RBI conducted a four-day VRR auction for INR 1.50 trillion at 0930-1000 IST and accepted all bids for INR 887.45 billion, the highest in the seven auctions this month. Three prior VRR auctions with a total maturity of INR 1.14 trillion were reversed on Monday.

 

This prompted even some state-owned banks to borrow in the interbank market, though most of the demand was met through mutual funds lending in the tri-party repo market. While state-owned banks held excess statutory liquidity ratio securities, some private-sector banks did not have sufficient excess to raise funds through the VRR or the tri-party repo market, dealers said. The central bank will need to conduct further overnight VRR auctions on Tuesday and Wednesday to keep money market rates in check as the government's month-end spending may only begin later in the week, they said. 

 

"The rates are going to be like this until liquidity improves, which is only going to come in through the month-end spending right now," a dealer at a state-owned bank said. "Till then, the RBI should have to support the market by doing continuous VRR (auctions) because people will start focusing on the reporting fortnight needs also from Wednesday."

 

OUTLOOK

On 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 from primary dealers amid tight liquidity in the banking system. Since the RBI has not yet announced a VRR auction for Tuesday, as traders widely expected, the call money rate may even rise to the Marginal Standing Facility rate of 5.50%, some dealers said. 

 

Banks subscribed to the RBI's four-day VRR auction Monday but said the central bank was likely to come up with overnight liquidity injections, which allow banks to manage their cash needs better without borrowing above the repo rate for a longer period, dealers said. Others said the absence of an auction announcement could be a sign that the RBI wants to tighten monetary policy ahead of the Monetary Policy Committee's meeting next week, amid rising inflationary pressures. 

 

Dealers expect the call rate to be around 4.80-5.50% during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.35%. The weighted average call rate is expected to be in the range of 5.20-5.35% Tuesday, while the weighted average tri-party repo market rate is likely to be in the range of 5.10-5.30%, they said.  

 

CALL RATE

5.35%--Monday close for one-day loans

5.45%--Monday open for one-day loans

5.37%--Friday close for three-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	FRIDAY
Overnight	5.43	5.43
3-day	--	--
14-day	5.83	5.87
1-month	5.95	5.93
3-month	6.58	6.53

 

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India Call: Above RBI's repo rate on low liquidity surplus; mkt sees VRR Tue

 

MUMBAI – The one-day interbank call money rate was above the Reserve Bank of India's repo rate of 5.25% owing to lower liquidity in the banking system. However, the rate cooled from the opening level after the RBI's four-day variable rate repo auction, dealers said.

 

At 1430 IST, the call rate for one-day loans was at 5.35%, barely changed from 5.37% Friday for three-day loans. The weighted average call rate was 5.38%, against 5.37% Friday. The volume in the call money market was INR 140.57 billion, down from INR 156.81 billion at the same time Friday. At 1430 IST, the one-day tri-party repo rate was 5.00%, down from 5.24% Friday for three-day loans. The weighted average one-day tri-party repo rate was 5.24%, also down from 5.26% Friday. The volume in the tri-party repo market was INR 4.70 trillion, against INR 4.64 trillion at the same time Friday.

 

Sunday, the RBI's net liquidity absorbed, which is an indication of the surplus liquidity, was INR 552.86 billion, up from INR 518.21 billion Saturday, and INR 549.77 billion Friday. Dealers expect the banking system liquidity to decline owing to maturity of three variable rate repo auctions scheduled for Monday.

 

Dealers expect the RBI to conduct another VRR auction Tuesday as the weighted average call rate remained above the repo rate. "MIBOR (Mumbai Interbank Offered Rate) is still high (at 5.43% Monday, unchanged from Friday) and weighted average call rate is also above repo. So, they (RBI) may get another VRR, overnight or three-day, tomorrow (Tuesday)," a dealer at a small finance bank said. "RBI's aim is to bring down rates. No matter if it is undersubscribed, they may still come up with a VRR," the dealer said.

 

Dealers expect the RBI to conduct an overnight variable rate repo auction for INR 500 billion to INR 750 billion Tuesday to support the banking system liquidity.  (J. Navya Sruthi)  

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India Call: Near RBI's MSF rate on early demand, seen easing

 

MUMBAI – The one-day interbank call money rate was up Monday mainly due to low surplus liquidity in the banking system. High appetite for funds at the beginning of market hours from primary dealerships and banks raised the call rate to near the Reserve Bank of India's Marginal Standing Facility rate of 5.50%, dealers said. 

 

The central bank will conduct its seventh variable rate repo auction this month. The RBI conducted a four-day VRR auction for INR 1.5 trillion and injected INR 887.45 billion, the highest so far this month. The RBI's VRR auction was to offset the impact of the outflow on account of the reversal of three of its earlier VRR auctions which will occur Monday, dealers said. The total amount that will flow out of the banking system on account of the reversal of these earlier auctions is INR 1.14 trillion. 

 

At 0930 IST, the one-day call money market rate was 5.45%, higher than 5.37% Friday for three-day loans. The weighted average call rate was 5.45%, also higher from 5.37% Friday. Trade volume in the call money market was INR 3.00 billion, a fraction of the INR 44.75 billion at the same time Friday. At 0930 IST, the one-day tri-party repo rate was 5.25%, up marginally from 5.24% Friday for three-day loans. The weighted average one-day tri-part repo rate was also 5.25%. The turnover in the tri-party repo market was INR 2.23 trillion.

Dealers do not expect the call rate to cross the MSF rate due to the RBI's VRR auction. Dealers expect the call rate to be around 4.80-5.50% during the day while the tri-party repo rate is expected to be around 4.90–5.35%. 

 

"Even if the call rate will cross MSF (rate), that would be only for a few trades if the VRR auction is poorly subscribed and there is still demand for funds," a dealer at a private sector bank said.

 

The net liquidity absorbed by the RBI – an indication of surplus liquidity in the banking system – was INR 549.77 billion Friday, the lowest since Mar. 26, and down from INR 588.76 billion Thursday, according to the latest data. Liquidity fell mainly due to outflow for payments of goods and services tax payments last week. Banks' cash balances with the RBI rose to INR 7.91 trillion Friday from INR 7.74 trillion Thursday.

 

"The RBI will conduct more VRR (auctions) this week as liquidity will remain below 1 trillion," a dealer at another private sector bank said. "If this VRR (4-day VRR auction Monday) is less subscribed, then it (the RBI) will again come up with VRR tomorrow (Tuesday). (Staff Reporter)  End

 

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

 

Edited by Saji George Titus

 

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