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Informist, Wednesday, May 27, 2026

By Aaryan Khanna

NEW DELHI – The interbank call money rate rose and ended at the Reserve Bank of India's Marginal Standing Facility Rate of 5.50% Wednesday due to late demand for funds from banks before a holiday and lack of lenders, dealers said. This was the highest closing level for the call money rate since Mar. 30, when the rate had spiked to 7.00% at the end of the financial year. 

The last two trades Wednesday, both at 5.50%, were struck after 1845 IST and were of less than INR 1 billion each. "These are small trades from small banks that have come to the market just before the close and the rates have spiked because of the late hour," a dealer at a state-owned bank said. "Since trade volumes are high and borrowers are getting funds, I wouldn't say that the market has undue stress, but it will benefit from more liquidity."

The two-day call rate ended at 5.50% Wednesday, up from 5.45% at the open and also higher than Tuesday's close of 5.30% for one-day loans. India's financial markets are shut Thursday for Bakri Id. The weighted average call rate was 5.36%, similar to 5.35% Tuesday. The overnight call money trade volume was INR 188.87 billion, up from INR 142.83 billion Tuesday.

The two-day tri-party repo rate ended at 5.54%, sharply up from 5.09% Monday. The overnight tri-party repo rate Wednesday ended at its highest since Jan. 2, with both spikes correlating to high bank demand and low cash surpluses with mutual funds to lend, dealers said. The weighted average rate in the tri-party repo market was 5.24% Wednesday, up from 5.18% Tuesday. The turnover in the most-traded contract was INR 5.31 trillion, slightly lower than INR 5.35 trillion Tuesday.

The RBI absorbed INR 544.65 billion on Tuesday from the banking system, down from INR 672.85 billion Monday, according to the latest data. There were no major inflows or outflows Wednesday, dealers said. Net outflows worth INR 65.19 billion were scheduled, which took place, they said. Most traders had expected the government to begin its usual month-end spending by Wednesday but three state-owned banks said they had not received any inflows linked to those payments so far, dealers said.

Demand for funds was also high as some were borrowing in the money market to meet their cash reserve ratio requirements, dealers said. Banks held INR 7.81 trillion in cash balances with the RBI Tuesday, below the regulatory requirement of INR 7.97 trillion average for the reporting fortnight ending Sunday. Their daily holdings from May 16-26 have averaged exactly INR 7.97 trillion, which led to an increase in borrowing Wednesday, dealers said. The money market is shut Thursday and Sunday and trade volumes will be muted as usual Saturday, which is likely to put pressure on money market rates Friday, dealers said. 

Traders were divided on whether the central bank would conduct a variable rate repo auction on Friday, with the consenus expectation being a three-day auction for up to INR 1.50 trillion. The RBI's four-day VRR auction conducted Monday will mature on Friday, draining INR 887.45 billion with banks. The settlement of the RBI's $5 billion, three-year dollar-rupee buy-sell swap auction will add around INR 500 billion of durable liquidity to the banking system Friday but more support from the central bank will likely be needed to keep the call rate below the MSF rate of 5.50%, dealers said. 

"I think there's a strong possibility he (RBI) will roll over the VRR auction on Friday because I don't think liquidity will be comfortable yet, plus there is the end of the (reporting) fortnight," a dealer at a private-sector bank said. "From what we have seen no big government spending has come in yet."

OUTLOOK

India's financial markets are shut Thursday for Bakri Id. On Friday, the three-day day interbank call money rate is likely to open near the RBI's MSF rate of 5.50% owing to early demand from primary dealers and some banks, dealers said.

Traders expect the RBI to conduct a VRR auction Friday as banks need for cash will spike ahead of the end of the reporting fortnight on Sunday. The maturity of a four-day VRR Friday worth INR 887 billion will also lead to demand for funds, dealers said. The settlement of the RBI's dollar-rupee swap auction and the government's month-end spending are expecting to increase the liquidity surplus in the banking system but the call money rate may still remain above the policy repo rate of 5.45%.

Dealers expect the call rate to be in the 4.70–5.50% range during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.40%. The weighted average call rate is expected to be in the range of 5.25-5.45% while the weighted average tri-party repo market rate is likely to be in the range of 5.15-5.30%, they said.

CALL RATE

5.50%--Wednesday close for two-day loans

5.45%--Wednesday open for two-day loans

5.30%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's SDF rate as borrowers meet demand in early trade

MUMBAI – The two-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as demand for funds fell due to lack of major scheduled outflows, dealers said. Primary dealerships and some private sector banks met their cash requirements in early trade Wednesday, they said. 

At 1430 IST, the two-day call rate was 4.60%, sharply lower than 5.45% at open and 5.30% on Tuesday for one-day loans. The weighted average call rate was 5.39%, up from 5.35% Tuesday. The two-day call money trade volume was INR 127.22 billion, similar to INR 125.90 billion at the same time Tuesday. At 1430 IST, the two-day tri-party repo rate was 5.32%, up from 5.21% at open and unchanged from Tuesday's close. The two-day tri-party weighted average rate was 5.22%, up from 5.18% Tuesday for one-day loans. At 1430 IST, the turnover in the tri-party repo market was INR 4.77 trillion, slightly higher than INR 4.68 trillion at 1430 IST Tuesday. 

Although liquidity remains constrained, the call rate is unlikely to cross the RBI's Marginal Standing Facility rate of 5.50% this week due to lack of any major outflows, dealers said. As usual, mutual funds were on the lending side in the tri-party repo market and in the call money market, some large public sector banks were on the lending side, they said.

"There is no such demand in the market today (Wednesday) other than CRR (cash reserve ratio)," a dealer at a private sector bank said. "Most banks have sufficient liquidity to maintain the CRR, only some private sector banks could borrow later in the day to maintain it (cash reserve ratio)."

The RBI absorbed INR 544.65 billion on Tuesday from the banking system, down from INR 672.85 billion Monday, according to the latest data. The absorption from the RBI indicates the surplus liquidity in the banking system. Banks maintained INR 7.81 trillion in cash balances with the RBI Tuesday, slightly higher than INR 7.79 trillion on Monday. The average cash balance banks need to maintain till Sunday is INR 7.97 trillion.

As liquidity remains below INR 1 trillion, dealers expect the RBI to conduct a three-day variable rate repo auction Friday for INR 1 trillion-INR 1.5 trillion as a rollover of a four-day VRR auction, through which the RBI had infused INR 887.45 billion Monday.

For the rest of the day, the weighted average call rate is expected to be around 5.40% and that in tri-party market is likely to be around 5.20%. Dealers expect the call rate could rise later in the day if some banks borrow after the tri-party repo shuts at 1600 IST. The call market will be shut Thursday on account of Id-ul-Zuha.  (Durgesh Nandan)

India Call: Near MSF as rupee liquidity remains tight

MUMBAI – The two-day interbank call money rate Wednesday traded near the Reserve Bank of India's Marginal Standing Facility rate and above Tuesday's close for one-day loans, as rupee liquidity remained tight. The settlement of the first leg of the $5-billion, dollar-rupee buy-sell swap conducted by the central bank Tuesday will add to systemic liquidity Friday, but until then banks will have to depend on overnight borrowing markets for funds, with no variable rate repo operation for Wednesday announced, dealers said. The RBI last conducted a VRR on Monday.

At 0930 IST, the two-day call money market rate was 5.45%, up from Tuesday's close of 5.30% for one-day loans. The weighted average call rate was 5.45%, higher than 5.35% Tuesday. Two-day call market trade volumes were INR 36.19 billion, down from INR 53.49 billion Tuesday at the same time. An outstanding VRR of INR 887.45 billion helped funding requirements, dealers said. Indian financial markets will remain shut Thursday for Id-ul-Zuha. 

"Rupee forwards are definitely affecting markets. Luckily we had already covered our position yesterday (Tuesday)...by 2:30 pm rates had gone up," a dealer at a primary dealership said. "Today though, I'm expecting the rate to cool off to 5.15-5.16% levels, for TREPS atleast." Tuesday, near-maturity dollar rupee forward rates were at their highest since early April. 

At 0930 IST, the two-day tri-party repo rate was 5.20%, down from 5.40% for one-day loans Tuesday. The weighted average rate was 5.20%, a tad higher than 5.18% Tuesday. The turnover in the tri-party repo market was INR 1.31 trillion, a tad down from INR 1.49 trillion at the same time Tuesday.  

The net liquidity absorbed by the RBI – an indication of surplus liquidity in the banking system – was INR 545 billion Tuesday, down from INR 673 billion Monday, according to the latest data. Tuesday, banks maintained INR 7.81 trillion in cash balances with the RBI, inching up from INR 7.79 trillion Monday. The average cash balance banks need to maintain till Sunday is INR 7.97 trillion. Demand for funds is likely to increase nearing the end of the week as banks rush to maintain their cash balances ahead of the reporting fortnight ending Sunday. The end of the month would also be of significance for traders borrowing funds, as credit demand is usually higher than usual at the time, dealers said. 

"I'm expecting by 29th RBI should come up with a VRR, because now we still have an outstanding VRR even though liquidity is still low," a dealer at a private sector bank said. "But it will also depend on when government spending starts."

Wednesday, outflows of INR 116.25 billion are scheduled for the payment of the state bond auction conducted Tuesday. For the rest of the day, dealers expect the call rate to be around 4.70–5.50%, while the tri-party repo rate is expected to be at 5.00–5.35%.  (Cassandra Carvalho)

End

US$1 = INR 95.69

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

Edited by Akul Nishant Akhoury

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