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Informist, Thursday, Jun. 25, 2026

 

By Durgesh Nandan

 

MUMBAI – The four-day interbank call money rate Thursday ended near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% on demand from banks to meet credit disbursal requirements for the quarter-end amid a liquidity deficit, dealers said. Funding requirements from banks to meet four-day and month-end cash needs pushed up money market rates throughout the day, with rates exceeding the Liquidity Adjustment Facility corridor. Money markets are closed on Friday for Muharram.

 

The four-day call rate ended at 5.40%, up from 5.35% Wednesday for one-day loans. The weighted average call rate was 5.39%, marginally up from 5.37% Wednesday. The turnover in the overnight call contract was INR 195.62 billion, down from INR 219.19 billion Wednesday. There were significant volumes after 1700 IST in the call money market, suggesting high demand to meet daily cash requirements. The lack of lenders at that time likely pushed up the call money rates, dealers said. 

 

The four-day tri-party repo rate ended at 5.50%, down from 5.55% Wednesday for one-day funds. The weighted average tri-party rate rose to 5.30% from 5.20% Wednesday. The volume for the most-traded tri-party repo contract was INR 4.55 trillion, the lowest in over two months, compared to INR 4.62 trillion Wednesday. For the second consecutive day, the tri-party repo rate settled at the Marginal Standing Facility rate of 5.50% or above, as quarter-end demand and liquidity deficit prompted banks to borrow at a higher rate, dealers said.

 

"Banks borrowed in the TREPs (tri-party repo) market at such a higher rate and not in call, because in call banks have to negotiate, but in TREPs they don't have to do this, so maybe to avoid negotiation, banks borrowed in the TREPs market," a dealer at a state-owned bank said. 

 

The net liquidity injected by the RBI into the banking system was INR 103.12 billion Wednesday, down from INR 148.24 billion Tuesday. An injection indicates a liquidity deficit in the banking system. Liquidity has been in deficit for the last three days due to outflows for goods and services tax payments.

 

The liquidity deficit decreased slightly as cash balances with the RBI declined to INR 7.72 trillion Wednesday, from INR 7.85 trillion Tuesday. The liquidity is likely to turn into a small surplus Monday as banks start using the RBI's concessional swap facility to convert dollars coming from foreign currency non-resident deposits to rupee, the dealer quoted above said. 

 

The RBI's announcement of a INR-500-billion four-day variable rate repo auction in early trade was likely meant to keep the call money rate within the LAF corridor, dealers said. However, the auction got a weak response from the market. The central bank got bids for only INR 168 billion. The RBI had infused INR 1.41 trillion through a seven-day VRR auction Tuesday but refrained from conducting a liquidity injection Wednesday or announcing one for Thursday before the call rate spiked in early trade. 

 

"Even we don't understand why banks didn't borrow at VRR, where the rate was low, and later they borrowed at a higher rate in the TREPs market," a dealer at another state-owned bank said. "Maybe they were thinking that rates would fall in the second half of the day, but due to liquidity deficit, there are more borrowers in the market than lenders, and the rate rose sharply in the TREPs market."

 

OUTLOOK

Money markets are closed on Friday and Saturday. On Monday, the one-day interbank call money rate is expected to open above the repo rate due to early demand for funds from primary dealerships, dealers said. Banks will avoid lending and may be borrowers as they look to meet credit disbursal needs amid a liquidity crunch in the banking system.

 

The RBI will conduct a two-day, INR 750 billion VRR auction at 0930-1000 IST Monday, it announced after market hours Thursday. Traders widely expected such an announcement as the central bank is seen trying to keep the call rate within the Liquidity Adjustment Facility corridor of 5.00-5.50%. The VRR auction will infuse liquidity at fortnight-end and quarter-end on Tuesday, when demand for funds from banks will be very high.

 

Dealers expect the call rate to be at 4.60–5.50% Monday. The tri-party repo rate is expected to be in the 4.90–5.45?nd. 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%, they said. 

 

CALL RATE

5.40%--Thursday close for four-day loans

5.45%--Thursday open for four-day loans

5.35%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.43	5.43
3-day	--	--
14-day	6.03	6.05
1-month	6.20	6.19
3-month	6.62	6.62

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India Call: Call, tri-party rates top MSF as banks' demand for funds surges

 

--Dealers:Tri-party repo rate tops MSF rate; bks demand for funds sharply up 

--Dealers: Banks borrowing in TREPS mkt to meet quarter-end lending needs 

--Dealers: Bks borrow in TREPS mkt after low subscription at RBI VRR auction 

--Dealers:Bks borrow in TREPS mkt to meet 4-day funding needs before weekend 

 

NEW DELHI – The four-day interbank call money and tri-party repo rates surged above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% due to a rise in demand for funds from banks, dealers said. The surge in demand came as banks faced maturing deposits and high credit offtake near the end of the June quarter, while also having to meet the routine demand for funds ahead of the long weekend. Money markets will be shut on Friday for Muharram. 

 

"People seem to have miscalculated their demand at the VRR (variable rate repo auction) today (Thursday)," a dealer at a private sector bank. "There is a lot of demand for funds since it is near the quarter-end and there is a three-day weekend as well." 

 

At 1535 IST, the four-day call money rate was at 5.55%, up from 5.25% at 1210 IST and 5.45% at the open. The weighted average call rate was 5.39%, slightly above 5.37% for one-day loans Wednesday. The four-day tri-party repo rate was 5.55%, up from 5.33% at 1210 IST and 5.23% at the open. The overnight weighted average tri-party repo rate rose to 5.30% from 5.20% Wednesday.

 

There were no significant inflows or outflows Thursday but liquidity conditions remained tight, dealers said. The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 103.12 billion Wednesday. The deficit prevented large banks from lending to smaller banks in the call market and pulled down trade volumes as well as pushed up rates. Some stress was also there on the lending side in the tri-party repo market as mutual funds were facing redemption pressures towards the quarter-end on Tuesday. The tri-party repo rate rose earlier, followed by the interbank call money rate rising, dealers said.

 

The RBI announced and conducted a four-day variable rate repo auction worth INR 500 billion earlier Thursday. However, it got bids worth only INR 168 billion at the auction as mutual funds were lending cash in the tri-party repo market around the repo rate. The poor subscription contributed to the late spike in money market rates towards the close of the tri-party repo market at 1600 IST, dealers said.  (Aaryan Khanna)

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India Call: Remains near and above repo after 4-day VRR poorly subscribed

 

MUMBAI – The four-day interbank call money rate fell slightly below its opening level but remained elevated, at or above the Reserve Bank of India's repo rate of 5.25% amid a liquidity deficit in the banking system and poor subscription at the INR-500-billion variable rate repo auction the central bank conducted earlier in the day. Persistent demand for funds from banks for credit disbursements towards the end of the reporting quarter and borrowing for four-day cash requirements pushed up the rate, dealers said. 

 

"Credit offtake typically picks up at month-end, while some deposits also mature during this period, prompting banks to borrow funds to manage their liquidity requirements plus there is an end of the (reporting) fortnight on Tuesday," a dealer at a public sector bank said.  

 

At 1210 IST, the four-day call rate was at 5.25%, lower than 5.45% at open and 5.35% at Wednesday's close for one-day loans. The weighted average call rate was 5.42%, up from 5.37% Wednesday. The weighted average call rate was near the Marginal Standing Facility rate of 5.50%, indicating that tight liquidity conditions has pushed up rates, dealers said. The trade volume in the overnight contract was INR 101.08 billion, down from INR 138.08 billion at 1230 IST Wednesday. 

 

At 1210 IST, the four-day tri-party rate was 5.33%, up from 5.23% at open, but down from 5.55% at Wednesday's close for one-day loans. The weighted average tri-party rate was 5.26%, higher than 5.20% Wednesday. The trade volume was INR 3.27 trillion, similar to INR 3.29 trillion at 1230 IST Wednesday.  

 

The RBI conducted a four-day variable rate repo auction of INR 500 billion earlier in the day and accepted all bids received. The auction was poorly subscribed, with bids amounting to only INR 168 billion. Dealers attributed the poor subscription to relatively cheaper funding available in the tri-party repo market at the time of the auction. The tri-party repo rate was in the 5.24%-5.26% range, around or below the repo rate, making it a more attractive source of funding than the RBI's VRR window, where the cut-off rate is required to be above the repo rate. Even as the call and TREPs rates are trading at or above the repo rate, the RBI is unlikely to conduct another VRR auction Thursday. This is primarily because the morning auction saw weak subscription, and hence reduces the likelihood of a second VRR, dealers said. "..Had the VRR auction attracted subscription of at least INR 350 billion, money market rates could have eased more meaningfully," a dealer at a private sector bank said. 

 

"It (the VRR) came unannounced, and by the time the VRR auction was conducted, some market participants may have already met their funding requirements through the call money and TREPs markets, which could also lead to low subscription amid liquidity deficit," a dealer at another private sector bank said. 

 

The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 103.12 billion Wednesday, down from INR 148.24 billion Tuesday. Dealers expect the deficit to persist until government spending begins at the end of the month. (Shumaila Firoz) 

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India Call: Near MSF on quarter-end credit offtake amid liquidity deficit 

 

MUMBAI – The four-day interbank call money rate was up Thursday and near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% on funding requirements from primary dealerships and banks to meet four-day payment obligations amid a liquidity deficit, dealers said. Banks primarily borrowed to meet cash needs for quarter-end credit disbursements, they said. Money markets will be shut Friday on account of Muharram.

 

In line with market expectations, the RBI conducted a four-day variable rate repo auction for INR 500 billion between 1000 IST to 1030 IST. Dealers expect the call rate to cool down later in the day as traders borrow funds through the VRR.

 

At 1014 IST, the four-day call money rate was 5.44%, up from 5.35% Wednesday for one-day loans. The weighted average call rate was also 5.44%, higher than 5.37% Wednesday. The trade volume in the call money market was INR 53.21 billion, down from INR 97.25 billion at 1030 IST Wednesday. At 1014 IST, the four-day tri-party repo rate was 5.26%, sharply down from 5.55% Wednesday for one-day funds but above the repo rate. The weighted average rate was 5.25%, higher than 5.20% the previous day. The turnover in the tri-party repo market was INR 2.52 trillion, compared with INR 2.35 trillion at 1030 IST Wednesday.

 

"We expected a four-day VRR auction, for 50 thousand crore to 1 lakh crore (INR 500 billion to INR 1 trillion), as rates were high in early trade now the rate is expected to cool down in the second half of the day," a dealer at a state-owned bank said. "The RBI has conducted several VRR auctions this month, so the market expected more of the liquidity infusion."

 

The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 103.12 billion Wednesday, down from INR 148.24 billion Tuesday. The systemic liquidity is expected to turn surplus only after inflows from the central government in the form of salaries and pensions begin by end of this month, 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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