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Informist, Wednesday, Jul. 15, 2026

By Cassandra Carvalho    

MUMBAI – The one-day interbank call money rate ended above the Reserve Bank of India's repo rate of 5.25% Wednesday as demand for funds rose in the second half of trade, on the last day of the reporting fortnight. As some traders were expecting, the RBI, post market hours, said it will conduct an overnight variable rate repo auction for INR 750 billion Thursday. Demand for funds is seen high Thursday as it is the last day of the initial public offering of SBI Funds Management, which is one of the largest Indian IPOs this year. Qualified institutional buyers usually invest in IPOs on the last day, dealers said. 

"Whichever bank didn't get in anchor (anchor investment) is planning to go full book for the IPO, so think what 20 banks parking 7,200 crores is going to be," a dealer at a private sector bank said. 

For most of the day, money market rates were below the repo rate on low demand for funds, with most banks expecting to fulfil the cash balances required for the end of the reporting fortnight due to surplus liquidity. However, the liquidity in the banking system was skewed, with only some banks receiving inflows through foreign currency non-resident bank deposits, dealers said. Some banks also faced outflows due to the Reserve Bank of India's dollar sales in the foreign exchange spot market in defence of the rupee. 

Some dealers were not expecting the RBI to conduct any VRR until outflows for goods and services tax begin next week, dealers said. Rates in the tri-party repo market have cooled significantly, making it cheaper to borrow in the collateralised market than the minimum rate of 5.26% at a VRR. 

"TREPS rate is much lower, call is still high because people have their inter-bank lending limits and liquidity is skewed, but with TREPS at these levels I don't think RBI will come up with any repo operation," a dealer at a state-owned bank said. 
 

The one-day call money rate ended at 5.35% Wednesday, higher than 5.25% Tuesday. The weighted average call rate was 5.24%, same as Tuesday. The volume in the market was INR 184.01 billion Wednesday, lower than INR 226.63 billion Tuesday. The one-day tri-party repo rate ended at 5.45%, sharply up from 5.05% Tuesday. The weighted average rate was 5.13%, higher than the previous day's 5.09%. The volume in the TREPS market was INR 4.58 trillion, more than INR 4.43 trillion in the previous session.

OUTLOOK

On Thursday, the one-day interbank call money rate is seen at or above the RBI's repo rate of 5.25% amid demand for funds on the last day of the IPO of SBI Funds Management and outflows linked to the RBI's foreign exchange management operations. 

Dealers expect the call rate to be at 4.60–5.40% Thursday. The tri-party repo rate is expected to be in the 4.90–5.30% band. The weighted average call rate is expected to be in the 5.20–5.30% band, and that in the tri-party repo market is likely to be in the 5.00–5.20% band, they said.

CALL RATE

5.35%--Wednesday close for one-day loans

5.27%--Wednesday open for one-day loans

5.25%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Falls below SDF rate on lack of demand for funds from banks

NEW DELHI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to lack of demand for funds from banks, dealers said. Banks cited a comfortable liquidity surplus and adequate cash balances near the end of the fortnight Wednesday for the lack of borrowing, leading to a fall in the call market rate after early demand for funds from primary dealers was met.

"Even though the liquidity surplus is only around INR 1 trillion on a net basis, there can be two reasons for the lack of demand," a dealer at a private sector bank said. "The first is that funds are evenly distributed among banks, but the bigger factor is that people have met their product requirements earlier in the fortnight."

Banks' cash balances with the RBI on Wednesday are likely to be lower than the average daily requirement of INR 7.98 trillion for the reporting fortnight, with the cash parked on Tuesday at INR 7.69 trillion, dealers said. This is because average daily cash balance parked between Jul. 1 and Tuesday were INR 8.02 trillion, above the regulatory requirement. The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was INR 1.49 trillion Tuesday, up from INR 1.39 trillion Monday, according to the latest data.

At 1430 IST, the one-day call rate was at 4.60%, lower than 5.27% at open and 5.25% at Tuesday's close. The weighted average call rate was 5.25%, similar to 5.24% Tuesday. The trade volume in the call market was INR 146.70 billion, sharply lower than INR 188.75 billion at the same time Tuesday. At 1430 IST, the one-day tri-party rate was 5.15%, the same as the opening level and higher than 5.05% at close on Tuesday. The weighted average tri-party rate was 5.09%, the same as Tuesday. The trade volume in the tri-party repo market was INR 3.83 trillion, similar to INR 3.81 trillion at 1435 IST Tuesday. 

Demand for funds may increase on Thursday at the beginning of the new reporting fortnight and when funds get blocked for SBI Funds Management's initial public offering worth INR 98 billion, which closes for retail subscription Thursday. The IPO will cause a mismatch in liquidity between collecting banks and others, which may push up the tri-party rate close to the repo rate and the call money rate higher than the policy rate Thursday, dealers said. 

However, the RBI is unlikely to announce a variable rate repo auction for Thursday as banking system liquidity continues to be in surplus, dealers said. It may react to a potential spike in the call money rate on Thursday or Friday by announcing liquidity injections during market hours. Even if the central bank does not step in later this week, traders widely expect a VRR auction during goods and services tax outflows next week, dealers said.  (Aaryan Khanna)

India Call: Above repo on PDs' early demand for funds; liquidity comfortable

NEW DELHI – The one-day interbank call money rate was above the Reserve Bank of India's policy repo rate of 5.25% in early trade Wednesday due to routine demand for cash from primary dealer to fund bond purchases, dealers said. Banks were on the lending side after having met their average cash requirements for the reporting fortnight ending Wednesday and with systemic liquidity comfortable, they said.

At 0950 IST, the one-day call rate was at 5.27%, slightly up from 5.25% Tuesday. The weighted average call rate was at 5.27%, up from 5.24% Tuesday, which was the first time since May the rate was below the repo. The volume in the overnight market was INR 93.29 billion, compared with INR 26.50 billion at 0930 IST Tuesday.

"It's the usual demand from primary dealers in the morning," a dealer at a private-sector bank said. "They had bid several times at 5.25% on the screen but no bank took the other side of that trade, so finally the deals were struck slightly above repo."

At 0950 IST, the tri-party repo rate for one-day loans was at 5.04%, similar to Tuesday's close of 5.05%. The weighted average rate was 5.08%, down from 5.09% Tuesday. The volume in the tri-party market was INR 1.90 trillion, compared with INR 1.01 trillion at 0930 IST Tuesday. The weighted average tri-party repo rate may inch close to the lower bound of the Liquidity Adjust Facility corridor Wednesday, near the Standing Deposit Facility rate of 5.00%, dealers said.

There were no major inflows or outflows Tuesday and none are scheduled Wednesday either beyond the settlement of the INR-245.70-billion state bond auction, dealers said. Scheduled coupon payments and redemptions on bonds by the Centre and states added INR 86.47 billion of liquidity Tuesday, which was likely the major cause of the slight increase in the banking system liquidity surplus.

The RBI's net liquidity absorbed--a proxy for the surplus--was INR 1.49 trillion Tuesday, up from INR 1.39 trillion Monday, according to the latest data. Banks' cash balances with the RBI rose slightly but were only at INR 7.69 trillion Tuesday, against the average requirement of INR 7.98 trillion for the reporting fortnight ending Wednesday. However, banks were not overtly worried about the day's shortfall and are unlikely to shore it up by borrowing in the money markets Wednesday as the systemic cash balance for the fortnight was INR 8.02 trillion, above the average daily requirement by the regulator.

Dealers expect banks' use of the RBI's concessional swap window for foreign currency non-resident deposits to add rupee liquidity into the banking system Wednesday. With liquidity already in surplus, supply is expected to exceed demand for funds during the day, pulling down the call rate, dealers said. However, they warned easy funding conditions may not persist.

The initial public offering of SBI Funds Management will close for retail subscription Thursday and expected to be oversubscribed. One of India's largest public offerings this year, the asset management firm is looking to raise INR 98.13 billion. The offer for sale is likely to be subscribed multiple times and the funds will be blocked with collecting banks until Monday, which will reduce the effective liquidity with banks. This may lead to an increase in bank borrowing from the money markets Thursday until Monday, after which goods and services tax outflows will drain liquidity, dealers said.  (Aaryan Khanna)

End

US$1 = INR 96.2550

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

Edited by Deepshikha Bhardwaj

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