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Informist, Monday, Jun. 29, 2026

 

By Durgesh Nandan

 

MUMBAI – The one-day interbank call money rate on Monday ended above the Reserve Bank of India's repo rate of 5.25% on demand for funds amid a liquidity deficit in the banking system that has persisted over the past week, dealers said. Banks borrowed to meet high cash needs due to strong credit disbursement at the end of the June quarter and the reporting fortnight on Tuesday, they said.

The one-day call rate ended at 5.35%, down from 5.40% Thursday for four-day loans. The weighted average call rate was 5.34%, down from 5.39% Thursday. The turnover in the overnight call contract was INR 173.08 billion, down from INR 195.62 billion Thursday. The one-day tri-party repo rate ended at 5.10%, down sharply from 5.50% Thursday for four-day funds. The weighted average tri-party rate fell slightly to 5.25% from 5.30% Thursday. The volume for the most-traded tri-party repo contract was INR 4.46 trillion, marginally down from INR 4.55 trillion Thursday.

 

The tri-party repo market reported its lowest volume since mid-April as banks met their funding needs through the RBI's variable-rate repo auction, dealers said. The two-day, INR 750-billion VRR auction was fully subscribed, with the RBI accepting bids worth INR 750.21 billion at a cut-off rate of 5.26%. This was only the second of 12 VRR auctions in June that drew more bids than the notified amount.

 

The net liquidity injected by the RBI into the banking system – a proxy for the systemic liquidity deficit – was INR 415.63 billion Sunday, slightly up from INR 407.88 billion Saturday, but a tad lower than INR 426.69 billion Friday. "We were expecting some inflows through FCNR (B)(foreign currency non-resident bank deposit), but it hasn't (come into the banking system) till now, otherwise the liquidity would have been in a better position," a dealer at a state-owned bank said.

 

Despite the liquidity deficit in the banking system, banks' cash balances with the RBI were higher than the average cash requirement of INR 8.01 trillion for the reporting fortnight ending Tuesday. Cash balances with the RBI were INR 8.10 trillion Sunday, similar to Saturday, though it was lower than INR 8.18 trillion Thursday, the last time money markets were open. 

 

The weighted average call rate is unlikely to fall below the repo rate for the next two to three days, even as the government's month-end spending kicks in, as market participants will look for a liquidity cushion at the end of the reporting fortnight and quarter-end, a dealer from another state-owned bank said.  "Today (Monday) by EOD (end of the day), we expect some inflows from the government and liquidity is likely to turn surplus tomorrow (Tuesday), but it will not be much," a dealer at another state-owned bank said. "Inflows of 2 lakh crore (INR 2 trillion) are expected, but it will reflect in Wednesday's data."

 

OUTLOOK

The one-day interbank call money rate Tuesday is likely to open above the RBI's repo rate on early demand for funds from primary dealerships, dealers said. Some banks are also likely to borrow to meet quarter-end funding requirements and maintain their cash balances with the RBI at the end of the reporting fortnight, they said.

 

The seven-day VRR of INR 1.41 trillion, conducted on Jun. 23, is scheduled to reverse on Tuesday. The RBI will conduct an overnight, INR 750 billion VRR auction at 0930-1000 IST Tuesday that will provide liquidity to the banking system across the quarter-end, in addition to the INR 750.21 billion injected via a two-day operation Monday. 

 

The government's bond buyback operation conducted on Monday would not have a significant impact on liquidity or money market rates, given the negligible amount, dealers said. The RBI accepted offers worth INR 73.88 billion to buy back four government bonds maturing in 2026-27 (Apr-Mar) at auction Monday, which will be settled 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 4.90–5.45?nd. The weighted average call rate is expected to be in the 5.25–5.35?nd, and that of the tri-party repo market is likely to be in the 5.20–5.30?nd, they said. 

 

CALL RATE

5.35%--Monday close for one-day loans

5.45%--Monday open for one-day loans

5.40%--Thursday close for four-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	THURSDAY
Overnight	5.43	5.43
3-day	--	--
14-day	6.02	6.03
1-month	6.19	6.20
3-month	6.61	6.62

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India Call: Near repo on quarter-, fortnight-end needs; firm demand at VRR

 

MUMBAI – The one-day interbank call money rate fell below its opening level but remained near the Reserve Bank of India's repo rate of 5.25% due to the high demand for funds from banks nearing the end of the reporting fortnight and quarter-end credit disbursement needs amid a liquidity deficit in the banking system, dealers said. The call money rate eased from near the Marginal Standing Facility rate to near the repo rate after robust demand at the RBI's two-day variable rate repo auction, but remained largely above the repo rate. 

 

The RBI conducted a two-day VRR auction of INR 750 billion earlier in the day and got bids worth INR 762.75 billion. Demand at the auction was strong as borrowing in the tri-party repo market was more expensive at the time, with the cut-off rate at the auction required to be above the repo rate of 5.25% and the tri-party repo rate trading above the RBI's repo rate in a range of 5.32-5.35%, dealers said.

 

"(The) RBI is likely to conduct another VRR auction tomorrow (Tuesday) of INR 1 trillion to INR 1.5 trillion for four-day tenure, to rollover the seven-day VRR conducted on Tuesday," a dealer at small finance bank said. The RBI had conducted a seven-day variable rate repo auction of INR 2 trillion Tuesday and had accepted all bids of INR 1.41 trillion.

 

At 1230 IST, the one-day call rate was at 5.30%, lower than 5.45% at open and 5.40% at Thursday's close for four-day loans. The weighted average call rate was 5.42%, up from 5.39% Thursday. The weighted average call rate was near the Marginal Standing Facility rate of 5.50%, indicating that tight liquidity conditions have pushed up rates, dealers said. The trade volume in the overnight contract was INR 101.32 billion, tad lower from INR 104.79 billion at the same time Thursday. Indian money market was closed Friday on account of Muharram. 

 

At 1230 IST, the one-day tri-party rate was 5.26%, similar to 5.27% at open, but down from 5.50% at Thursday's close for four-day loans. The weighted average tri-party rate was 5.31%, inching higher from 5.30% Thursday. The trade volume was INR 2.71 trillion, lower than INR 3.34 trillion at the same time Thursday.  

 

Even though some traders expect another VRR Tuesday, dealers expect the call money rate to ease in the coming sessions as the government's month-end spending has begun, leading to the infusion of funds into the banking system. "Liquidity is likely to improve from Jun. 30 (Tuesday) to Jul. 1 (Wednesday) as government spending gathers pace, which should bring overnight rates down slightly," a dealer at public-sector bank said. The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 415.63 billion Sunday, slightly up from INR 407.88 billion Saturday, and a tad lower from INR 426.69 billion Friday. (Shumaila Firoz) 

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India Call: Up on quarter-end, month-end cash needs amid liquidity deficit 

 

MUMBAI – The one-day interbank call money rate was up on Monday, near the Reserve Bank of India's Marginal Standing Facility rate of 5.50%, due to demand from primary dealerships and banks in early trade amid a liquidity deficit, dealers said. Some banks mainly borrowed to meet cash needs for quarter-end credit disbursal requirements, they said. 

At 0930 IST, the one-day call money rate was 5.45%, slightly higher than 5.40% Thursday for four-day funds. The weighted average call rate was 5.45%, also higher than 5.39% Thursday. The call money market trade volume was INR 13.30 billion, down from INR 19.13 billion at 0930 IST Thursday. At 0925 IST, the one-day tri-party repo rate was 5.33%, down from 5.55% Thursday for four-day loans. The weighted average rate was 5.32%, marginally higher than 5.30% Thursday. The turnover in the tri-party repo market was INR 590.88 billion, compared with INR 1.74 trillion at 0930 IST Thursday.

 

The call rate is likely to remain near the upper end of the Liquidity Adjustment Facility corridor due to higher funding requirements and deficit liquidity in the banking system, dealers said. The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 391.97 billion Thursday, up from INR 103.12 billion Wednesday.

 

"Banks need funds due to month-end and quarter-end payment obligations and liquidity is still in deficit, so rate in the overnight market will not fall today (Monday) even after the VRR (variable rate repo auction) auction will get 80-85% subscription," a dealer at a state-owned bank said.

 

The central bank conducted a two-day VRR auction for INR 750 billion Monday to provide temporary liquidity in the banking system and prevent a sharp rise in overnight rates, dealers said. Subscription at the auction is seen at INR 600 billion, with a cut-off of 5.26%, as per the median in an Informist poll of 13 market participants. Dealers expect the subscription to be between INR 338 billion and INR 750 billion. 

 

During the day, the call rate is expected to be in the range of 4.80-5.50%. They expect liquidity in the banking system to turn surplus once the government's month-end spending for salaries and pensions starts flowing into the banking system. Overnight rates are likely to stay at the higher end of the Liquidity Adjustment Facility corridor, 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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