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Informist, Monday, Jul. 6, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate ended at the Reserve Bank of India's repo rate Monday, up from Saturday's close for two-day loans, due to urgent funding requirements towards the end of trade after the tri-party repo market shut, dealers said. The funding requirement comes amid expected outflows of about INR 500 billion for excise duty and tax deducted at source Tuesday, and payment of INR 340 billion on Monday for gilts auctioned on Friday, dealers said.  

 

The weighted average call rate also dropped to the repo rate after several sessions--barring Saturdays--as systemic liquidity improved to a one-month-high. The net liquidity absorbed by the RBI from the banking system – a proxy for liquidity surplus in the banking system – was INR 1.85 trillion Sunday, the highest since Jun. 5. However, due to tax outflows and gilt payments, the liquidity surplus is seen at around INR 1 trillion this week.

 

"I think liquidity will be between 75 (INR 750 billion) to 1.5 (INR 1.5 trillion) give and take the tax and other outflows, some bond-related inflows are also there," a dealer at a state-owned bank said. 

 

The weighted average rate could fall below the repo rate in the near term, but some dealers said that the RBI is unlikely to let the rate fall close to the Standing Deposit Facility rate of 5.00% and is likely to introduce variable rate reverse repo operations. The RBI last conducted a VRRR mid-April. Broadly, traders expect the RBI to conduct a VRRR only if surplus liquidity rises above INR 2.5 trillion. 

 

While a surplus liquidity of INR 2.5 trillion is not seen immediate, inflows into foreign currency non-resident dollar-denominated bank deposits have begun, and are aiding banks' liquidity, dealers said. Some banks also borrowed at lower rates in the tri-party repo market and lent in the call money market, they said. 

 

"Banks are in surplus liquidity now, we're seeing the comfort, it's just PDs (primary dealers) now who need funds, so RBI is having VRRs for them," a dealer at a private sector bank said. 

 

Most dealers were not expecting the RBI to conduct more VRRs this week, but the central bank post market hours said it would conduct an overnight VRR for INR 500 billion Tuesday.  

 

The one-day call money rate ended at 5.25%, up from 4.85% for two-day loans Saturday. The weighted average call rate was at 5.25%, up from 4.88% Saturday. The volume in market was INR 177.91 billion Monday, against INR 7.45 billion Saturday. The one-day tri-party repo rate ended at 5.13%, up from 4.80% at close for two-day loans Saturday. The weighted average rate was 5.14%, up from 4.88% the previous day. The volume in the TREPS market was INR 4.86 trillion, up from INR 117.65 billion in the previous session.

 

OUTLOOK

On Tuesday, the one-day interbank call money rate is expected to open at the RBI's repo rate of 5.25% amid tax outflows but as liquidity is in surplus, dealers said. Liquidity conditions are expected to improve in the near term as foreign currency non-resident bank deposits are expected to pick up pace. Banks hedging deposits under the central bank's concessional swap window will gain rupee liquidity, potentially easing money market rates, dealers said. Later in the week, maturity of the 8.33%, 2026 gilt with an outstanding of over INR 310 billion Thursday will also add to systemic liquidity. 

 

Dealers expect the call rate to be at 4.60–5.30% Tuesday. The tri-party repo rate is expected to be in the 4.90–5.20?nd. The weighted average call rate is expected to be in the 5.20–5.30?nd, and that in the tri-party repo market is likely to be in the 5.10–5.20?nd, they said.

 

CALL RATE

5.25%--Monday close for one-day loans

5.30%--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	5.29	5.33
3-day	--	--
14-day	5.73	5.77
1-month	6.05	6.08
3-month	6.49	6.50

 

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India Call: At RBI's SDF rate as surplus liquidity at highest since Jun 5

 

MUMBAI – The one-day interbank call money rate fell from its opening level and was at the Reserve Bank of India's Standing Deposit Facility of 5.00% as the liquidity surplus rose to its highest level since Jun. 5 on the back of government month-end spending on salaries and pensions, dealers said. Earlier Monday, the RBI conducted a three-day variable rate repo auction of INR 750 billion ahead of outflows of around INR 500 billion for tax payment Tuesday and INR 340 billion for Friday's gilt auction payment.

 

Demand at the three-day VRR auction was poor and bids amounted to just INR 146 billion as market participants found borrowing in the tri-party repo market cheaper than the cut-off rate at the auction, which was required to be above the repo rate, dealers said. The tri-party repo rate was below the RBI's repo rate in a range of 5.14-5.17% during the auction.

 

"We expect outflows of around INR 500 billion due to excise duty and TDS (tax deducted at source) payments tomorrow (Tuesday), but that should not have much impact on overnight rates. Liquidity is comfortably in surplus, so the call rate is likely to remain between the Standing Deposit Facility rate (5.00%) and the repo rate (5.25%)," a dealer with a state-owned bank said. 

 

The net liquidity absorbed by the RBI, which is an indication of the surplus in the banking system, was INR 1.85 trillion Sunday, the highest since Jun. 5. The liquidity surplus was INR 1.70 trillion Saturday and INR 1.68 trillion Friday.

 

At 1410 IST, the one-day call rate was 4.60%, down from 5.30% at the open and 4.85% Saturday for two-day loans. The weighted average call rate was 5.27%, up from 4.88% Saturday. At 1410 IST, the trading volume in the overnight market was INR 151.12 billion, against INR 1.79 billion at 1330 IST Saturday.

 

At 1410 IST, the one-day tri-party rate was 5.13%, similar to its opening level but up from 4.80% at Saturday's close for two-day loans. The weighted average tri-party rate was 5.16%, higher than 4.88% Saturday. At 1410 IST, the trade volume was INR 4.16 trillion, against INR 89.92 billion at the same time Saturday.

 

Some dealers now expect the RBI to conduct a variable rate reverse repo auction if surplus liquidity remains above INR 1.5 trillion even after tax-related outflows Tuesday. They said the central bank is likely to step in if the weighted average call rate stays below the repo rate for a sustained period.

 

"There is a fair spread between call and tri-party repo market rates. If the weighted average call rate falls below 5.25% and remains below that for at least two days, then we can expect the RBI to conduct VRRR," a dealer at a small finance bank said. "If TREPs (tri-party repo rate) is at 5.00%, then with the current spread call will be at 5.15-5.20%, then in a day or two we can expect RBI to conduct VRRR." RBI wants the call rate to be around the repo rate.  (Shumaila Firoz)

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India Call: Above RBI's repo rate on demand for funds from PDs, some banks

 

MUMBAI – The one-day call money rate Monday was above the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks to meet daily cash requirements, dealers said. However, dealers expect the call money rate to cool down after meeting the usual cash needs, as liquidity surplus in the banking system rose due to the government's month-end spending on salaries and pensions.

 

At 0936 IST, the one-day call rate was at 5.30%, up from 4.85% for two-day loans on Saturday. The weighted average call rate was also at 5.30%, up from 4.88% Saturday. The volume in the overnight market was INR 22.99 billion, compared with INR 415 million at 1130 IST on Saturday. At the same time, the tri-party repo rate for one-day loans was at 5.17%, up from 4.80% Saturday, with a volume of INR 1.94 trillion. The market volume was up from INR 439.5 billion at 0945 IST on Saturday. The weighted average rate was 5.17%, up from 4.88% Saturday.   

 

The net liquidity absorbed by the RBI, which is a proxy for surplus in the banking system, was INR 1.68 trillion Friday, sharply up from INR 994.72 billion Thursday. Despite liquidity surplus in the banking system, the RBI conducted a three-day variable rate repo auction for INR 750 billion between 0930 IST and 1000 IST Monday. According to the median of 12 estimates in an Informist poll, the subscription is expected to be at INR 200 billion, and the cut-off is seen at 5.26%.  

 

Some dealers said the RBI has conducted this auction to support the banking system ahead of outflows of around INR 400 billion for excise duty and tax deducted at source scheduled for Tuesday. "We have 6.94% (2036 bond) auction (which was conducted Friday) outflows today (Monday), and excise duty, TDS flows will start tomorrow (Tuesday)... they came up with this (three-day VRR auction)," a dealer at a state-owned bank said. The settlement of the INR 340 billion weekly gilt auction is scheduled for Monday.   

 

Some dealers said the RBI conducted the VRR auction Monday to support a few market participants who need funds to meet their usual needs. "RBI is supporting the market with VRR. Maybe players are not getting (funds in the overnight market around the repo rate), so they (RBI) are supporting those participants with these auctions," a dealer at another state-owned bank said. (J. Navya Sruthi)

 

End

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

 

Edited by Avishek Dutta

 

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