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Informist, Monday, Jun. 22, 2026

 

By Durgesh Nandan

 

MUMBAI – The one-day interbank call money rate Monday ended above the Reserve Bank of India's repo rate of 5.25% as some banks borrowed cash to make goods and services tax payments. The quarter-end credit disbursal demand also prompted banks to borrow from the money market, primarily in the tri-party repo market, dealers said. Banking system liquidity likely fell into a deficit after the GST outflow, they said.

 

"Today there was demand for GST outflows and its impact will be seen in liquidity data tomorrow (Monday's liquidity data)," a dealer at another public sector bank said. "Liquidity is likely to turn deficit tomorrow (Tuesday) as major outflows happened today."

 

Traders peg GST outflows to be around INR 1.8 trillion between Friday and Tuesday. The bulk of the outflows occurred on Monday, leading to a liquidity crunch even among large state-owned lenders, which typically avoid borrowing in the call market, dealers said. The advance tax payments last week also contributed to tight liquidity and high money market rates.

 

The one-day call rate ended at 5.40%, up from 4.85% Saturday for two-day loans. The weighted average call rate was 5.33%, up from 4.85% Saturday and 5.36% Friday. The one-day call money volume was INR 191.52 billion, up from INR 7.40 billion for the two-day contract Saturday and INR 169.10 billion for three-day loans Friday. Money market rates and volumes are not comparable between Saturdays and weekdays due to the usual lack of activity on weekends.

 

"The rates in both the market (call and tri-party repo market) will remain high throughout the week," a dealer at a public-sector bank said. "The RBI will come up with more liquidity operations to control the rise in rates, at least for this week."

 

The one-day tri-party repo rate ended at 5.50% Monday, the highest closing level for the overnight contract since May 27. The closing level was up sharply from 5.00% on Saturday for two-day loans and 5.19% on Friday for three-day loans. The tri-party weighted average rate was 5.29%, up from 5.03% Saturday and 5.20% Friday. The volume for the most-traded tri-party repo contract was INR 4.85 trillion Monday, compared to INR 150.84 billion Saturday and INR 4.79 trillion Friday.

 

The tri-party repo rate crossed the RBI's Marginal Standing Facility rate of 5.50% on high demand from banks due to ongoing tax outflows, with a large portion of the payment likely taking place Monday. A few dealers also said the rise could be supported by cash needs from mutual funds as quarter-end approaches. 

 

"I do not think the TREPs rate (tri-party repo rate) rose to 5.50-5.60% only due to demand from banks. They could also have borrowed from the call, but there were mutual funds, which are only allowed to borrow from TREPs, so they (mutual funds) could be the reason behind the (sharp) rise," a dealer at a private-sector bank said. "It is possible that mutual funds have borrowed during the last hour to meet quarter-end redemptions pressure requirements."  

 

The net liquidity absorbed by the RBI, an indicator of surplus in the banking system, was INR 306.85 billion Sunday, down from INR 322.03 billion Saturday and INR 351.91 billion Friday, according to RBI data. The GST outflows and the settlement of the INR 320 billion gilt auction on Monday may have further drained liquidity, dealers said. 

 

The central bank Monday conducted the ninth variable rate repo auction for the month. The overnight VRR auction saw a weak response, with the RBI accepting all bids totalling INR 363 billion against the notified amount of INR 1.25 trillion. Dealers expect the RBI to conduct more VRR auctions this week to provide temporary liquidity into the banking system. 

 

OUTLOOK

On Tuesday, the one-day call money rate is expected to open above the RBI's repo rate of 5.25% on early demand from primary dealers and some banks amid what is likely to be a liquidity deficit in the banking system, dealers said. The RBI's large variable rate repo auction may keep the call money rate within the Liquidity Adjustment Facility corridor, they said.

 

The central bank will conduct a seven-day VRR auction for INR 2.00 trillion from 0930 IST to 1000 IST Tuesday. The auction will help banks meet funding requirements after GST-related outflows and allow them to roll over funds borrowed from the RBI under previous liquidity injections, dealers said. The overnight VRR auction of INR 363 billion held on Monday and the seven-day VRR auction of INR 894.40 billion held on Jun. 16 will reverse Tuesday. 

 

Dealers expect the call rate to be at 4.60–5.50% Tuesday. The tri-party repo rate is expected to be in the range of 4.90–5.30%. The weighted average call rate is expected to be around 5.25–5.35%, and that of the tri-party repo market is likely to be at 5.20-5.30%, dealers said. 

 

CALL RATE

5.40%--Monday close for one-day loans

5.40%--Monday open for one-day loans

4.85%--Saturday close for two-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.38	5.40
3-day	--	--
14-day	5.98	5.92
1-month	6.16	6.16
3-month	6.62	6.62

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India Call: Below SDF rate; tri-party repo rate surges as bks borrow for GST

 

MUMBAI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00?ter primary dealers met their early requirements, dealers said. Banks preferred to borrow in the larger tri-party repo market from mutual funds to make goods and services tax payments to the government, leading to a surge in the tri-party repo rate, they said.

 

The one-day tri-party repo ended at 5.50%, the highest closing level for the most-traded contract since May 27 for two-day loans. It was up sharply from opening at 5.24% and from Saturday's close of 5.00% for two-day loans. The weighted average tri-party repo rate was at 5.29%, also up from 5.03% Saturday. The tri-party repo market turnover was INR 4.85 trillion, against INR 104.83 billion Saturday. Trade volumes are usually minuscule Saturday as most participants meet their funding needs Friday, dealers said.

 

Outflows of around INR 1.8 trillion for GST payments began Friday, with the bulk of the payments flowing out Monday and likely to conclude Tuesday. Liquidity in the banking system is expected to turn into a deficit after this outflow, dealers said. The net liquidity absorbed by the RBI, an indicator of the surplus liquidity in the banking system, was INR 306.85 billion Sunday, down from INR 322.03 billion Saturday and INR 351.91 billion Friday, according to the latest release.

 

"Banks have to pay for GST and that is why the TREPS (tri-party repo rate) has shot up. Around this time there are not many lenders either," a dealer at a private-sector bank said. "I think its a phenomenon only for today as the flow is going and banks have miscalculated their needs at VRR (variable rate repo auction)."

 

Banks expected to meet their borrowing requirements below or near the repo rate of 5.25% in the overnight market early in the day and did not subscribe to the RBI's overnight VRR auction Monday, dealers said. Only 29% of the notified amount of INR 1.25 trillion was subcribed and the RBI accepted all bids of INR 363 billion at the cut-off rate of 5.26%. During the auction, the tri-party repo rate moved in the band of 5.23-5.26%, which was probably the reason for the poor subscription in the auction, dealers said. 

 

"The VRR was not fully subscribed due to (slightly) lower TREPs (tri-party) rate during that time," a dealer at a state-owned bank said. "This time mutual funds learnt their lesson. That's why they were neither lending too high nor too low, they were lending just near the repo to get good (interest) rate."

At 1600 IST, the one-day call money rate was at 4.95%, down from 5.40% at the opening, but up from Saturday's close of 4.85% for two-day funds. The call rate is expected to rise in the latter half of the day since the tri-party repo market is shut and banks will look to meet their funding needs before the day ends, dealers said. Consistently high credit disbursal near the month-end is also leading to a structually high requirement for funds, they said.

 

The weighted average call rate was 5.35%, also up sharply from 4.85% Saturday. The high weighted average indicates the concentrated demand in the initial hours of the market, they said. The call market volume was INR 173.58 billion, up significantly from INR 7.40 billion on Saturday. The call rate moved in a wide range of 4.20–5.42%.

 

Dealers expect another large VRR auction Tuesday due to the scheduled reversal of a seven-day VRR auction worth INR 894.40 billion and the maturity of Monday's operation. The notified amount may be INR 1.50 trillion or larger to help meet banks' cash needs after the GST outflows, dealers said.  (Durgesh Nandan and Aaryan Khanna)

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India Call: Above RBI's repo on GST outflow needs; VRR likely to ease rates
 

MUMBAI – The one-day interbank call money rate was above the Reserve Bank of India's repo rate of 5.25% on Monday due to demand from banks to meet goods and services tax outflow requirements, dealers said. Funding requirement from banks to fulfil quarter-end credit disbursal cash needs are likely to keep the call rate towards the higher end of the Liquidity Adjustment Facility corridor, they said. 

 

The central bank conducted an overnight variable rate repo auction for INR 1.25 trillion to infuse liquidity in the banking system amid outflows of around INR 1.8 trillion from the system for GST payments scheduled for Monday and Tuesday. Subscription at the auction is seen at INR 725 billion, with a cut-off of 5.26%, as per the median in an Informist poll of 12 market participants. Dealers expect the bids at the auction to be between INR 450 billion and INR 1.25 trillion.

 

Dealers expect overnight rates to fall after the VRR auction. If the auction is fully subscribed, the RBI is likely to conduct another VRR auction, a dealer at a small finance bank said.  

 

At 0930 IST, the one-day call money rate was 5.35%, significantly higher than 4.85% Saturday for two-day loans. The weighted average call rate was 5.27%, up sharply from 4.85% Saturday. The call money market trade volume was INR 36.10 billion, against INR 50 million at 1030 IST Saturday. During the day, the call rate is expected to be at 4.80-5.50%. The call rate is unlikely to cross the Marginal Standing Facility rate of 5.50% as the RBI will bring in another liquidity operation to limit the rise, dealers said.

 

At 0930 IST, the one-day tri-party repo rate was 5.23%, up from 5.00% Saturday for two-day funds. The weighted average rate was 5.14%, also higher than 5.03% Saturday. The turnover in the tri-party repo market was INR 1.13 trillion, against INR 12.15 billion at 1030 IST Saturday. Rates and volumes were low in the money market on Saturday due to limited participation.

 

The net liquidity absorbed by the RBI was INR 351.90 billion Friday, up from INR 191.63 billion Thursday. The absorption indicates the surplus liquidity in the banking system. Liquidity is likely to turn into a deficit after the outflows for GST payments, dealers said.  (Durgesh Nandan)

 

End

 

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

 

Edited by Saji George Titus

 

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