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Informist, Friday, May 29, 2026

By Aaryan Khanna

NEW DELHI – The interbank call money rate ended at its highest level since the end of March, rising to close above the Reserve Bank of India's Marginal Standing Facility rate of 5.50%. Dealers said the increased desperation for funds came from banks who needed to meet their fortnightly cash reserve ratio requirements with the RBI. 

The three-day call rate ended at 5.55% Friday, the same as its opening level. The call money rate rose from the 5.50% close for two-day loans Wednesday because the central bank refrained from announcing a variable rate repo auction for Friday, dealers said. A four-day VRR auction for INR 887.45 billion matured Friday, which led to increased demand for funds as banks looked to pay back the RBI's liquidity injection by asking for cash in the interbank market, they said. 

"Credit demand had been very strong and there is always more demand at the month-end," a dealer at a state-owned bank said. "And I have no doubt that the call rate has gone about MSF towards the end because it is the end of the reporting fortnight today (Friday)."

Banks held INR 7.83 trillion in cash balances with the RBI Thursday, below the regulatory requirement of INR 7.97 trillion average for the reporting fortnight ending Sunday. Their daily holdings from May 16-28 have averaged INR 7.95 trillion, which led to an increase in borrowing Friday, dealers said. Even though the call money market is open Saturday, trade volumes are dull and no sizeable borrowing can be conducted on the weekend, they said. 

Most traders have expected the RBI would roll over its VRR auction until at least Monday. After the call rate broke the top of the Liquidity Adjustment Facility corridor, the central bank announced a three-day VRR auction for INR 1 trillion at 1000-1030 IST. The auction was undersubscribed as some banks did not have enough of an excess of statutory liquidity ratio securities to offer to the RBI, while primary dealers had met their early demand for funds in the call market, dealers said.

The weighted average call rate was 5.47%, higher than 5.36% Wednesday. The trade volume of the three-day call money was INR 164.84 billion, lower than INR 188.87 billion for two-day loans Wednesday. India's financial markets were shut Thursday for Bakri Id.

The three-day tri-party repo rate ended at 5.00%, sharply lower than 5.25% at the open and 5.54% for two-day loans at the close Wednesday. However, the weighted average rate in the tri-party repo market was 5.35% Friday, up from 5.24% Wednesday. The turnover in the most-traded contract was INR 5.07 trillion, down from INR 5.31 trillion Wednesday.

The net liquidity absorbed by the RBI, an indication of surplus liquidity in the banking system, was INR 674.82 billion Thursday, up from INR 668.98 billion Wednesday, according to latest data. The surplus increased slightly since Wednesday due to some government spending, but the amount was not significant. Even on Friday, some public-sector banks got inflows for central government schemes but the payments would have been only around INR 300 billion system-wide, a dealer at another state-owned bank said. 

The settlement of the RBI's three-year, $5 billion dollar-rupee buy-sell swap auction added around INR 500 billion to banking system liquidity Friday, dealers said. However, the RBI's spot dollar sales to curb the rupee's depreciation will continue draining rupee liquidity into next week even if the pace of the government's month-end spending improves, they said.

OUTLOOK

On Saturday, the two-day day interbank call money rate is likely to open near the RBI's repo rate of 5.25% due to a low liquidity surplus. Trade activity is likely to be muted as is usually the case on Saturdays, dealers said.

Dealers expect the call rate to be in the 4.60–5.40% range on Saturday, 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 5.15-5.30%, they said.

The settlement of the RBI's dollar-rupee swap auction Friday and the government's month-end spending are expected to increase the liquidity surplus in the banking system by next week. However, the call money rate may still remain above the policy repo rate of 5.25% Monday, dealers said.

CALL RATE

5.55%--Friday close for three-day loans

5.55%--Friday open for three-day loans

5.50%--Wednesday close for two-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's SDF rate as demand eases on lack of major outflows

MUMBAI – The three-day interbank call money rate was at the Reserve Bank of India's standing deposit facility rate of 5.00% as demand eased because of the lack of major scheduled outflows Friday, dealers said. Liquidity in the banking system remained tight ahead of the end of the reporting fortnight, so dealers expect the call rate to rise after the tri-party repo market closed at 1600 IST. The weighted average call rate was near the RBI's marginal standing facility rate of 5.50% due to month-end and three-day cash needs, they said.

The central bank conducted a three-day variable rate repo auction for INR 1 trillion Friday and accepted all the bids, amounting to INR 945.96 billion, at a cut-off rate of 5.26%. The VRR auction was a rollover of the four-day VRR auction the RBI had conducted Monday, dealers said. The RBI had infused INR 887.45 billion through Monday's auction. Traders had expected a VRR auction Friday because of the tight liquidity in the banking system, they added.

"If rates in the overnight market will be in the same range (above repo rate) then they might come up with another (VRR) auction on Monday," a dealer at a public-sector bank said. "The RBI is closely monitoring the rates as we were expecting the auction on Wednesday, but it didn't (announce one) as the rates were below MSF, but today (Friday) they saw the rates above MSF (rate) and conducted the auction to cool off the rates." The money markets were shut Thursday for Id-ul-Zuha (Bakri Id).
 

At 1650 IST, the three-day call rate was at 5.00%, sharply down from 5.55% at the open and 5.50% Wednesday for two-day loans. The weighted average call rate was 5.47%, up from 5.36% Wednesday. The three-day call money trade volume was INR 160.34 billion, up from INR 157.17 billion at 1630 IST Wednesday. The three-day call rate had opened at 5.55%, its highest opening since Mar. 30. Some banks in the overnight market were borrowing to meet month-end credit disbursal requirements, dealers said.

The three-day tri-party repo ended at 5.00%, sharply down from 5.54% at Wednesday's closing for two-day loans. The three-day tri-party weighted average rate was 5.35%, up from 5.24% Wednesday. The turnover in the tri-party repo market was INR 5.07 trillion, down slightly from INR 5.31 trillion Wednesday. The tri-party repo rate went up to 5.65% as banks rushed for funds during the last hour of trade near the fortnight-end to fulfil their cash needs.

The net liquidity absorbed by the RBI, an indication of surplus liquidity in the banking system, was INR 668.98 billion Wednesday, up from INR 544.65 billion Tuesday.

Dealers expect the month-end spending from the central government by Saturday. Inflows of INR 1 trillion are likely to be transferred into the banking system. Around INR 400 billion-INR 450 billion from the three-year dollar-rupee buy-sell swap auction conducted Tuesday is also likely to support liquidity, they said.

For the rest of the day, the weighted average call rate is expected to be around 5.40-5.50%, dealers said.  (Durgesh Nandan)

India Call: Above RBI's MSF rate on fortnight-end needs, reversal of VRR

MUMBAI – The three-day interbank call money rate rose Friday and was above the Reserve Bank of India's Marginal Standing Facility of 5.50% due to firm demand for funds amid the end of the reporting fortnight and the reversal of the four-day variable rate repo auction, dealers said. The tri-party repo rate was above the RBI's repo rate of 5.25% as the liquidity surplus remained below INR 1 trillion.         

At 0930 IST, the three-day call money rate was at 5.55%, up from 5.50% for two-day loans on Tuesday. The three-day tri-party repo rate was at 5.36%, down from 5.54% but above the RBI's repo rate of 5.25%. At the same time, INR 1.76 trillion was the volume in the tri-party repo market, higher than INR 1.31 trillion the previous day. Volume in the call money market was INR 24 billion, down from INR 36 billion Wednesday.

The RBI absorbed INR 668.98 billion on Wednesday from the banking system, up from INR 544.65 billion Tuesday, according to the latest data. Cash balances with the RBI also rose to INR 7.90 trillion Wednesday from INR 7.81 trillion Tuesday.

"With regular credit disbursements and reversal of (four-day) VRR, people were borrowing at higher rates. Almost 2 lakh crore (INR 2 trillion) volume is already done in TREPS (tri-party repo market)," a dealer at a small finance bank said. "We were expecting rates to rise further, but then we have VRR now. So rates are expected to fall," the dealer said.    

RBI's three-day VRR auction between 1000 IST and 1030 IST for INR 1.00 trillion is underway. A dealer at a private sector bank said the VRR auction is likely to be fully subscribed with the cut-off at 5.27% as rates in the overnight market were higher. 

Dealers said the call money rate is likely to fall below the repo rate during the day as inflows of around INR 470 billion from Tuesday's dollar-rupee buy-sell swap auction will support the banking system's liquidity. They now await the liquidity figure for Thursday, which is due later during the day.  (J. Navya Sruthi)

End

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

Edited by Akul Nishant Akhoury

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