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Informist, Friday, Jul. 17, 2026

By Aaryan Khanna

NEW DELHI – The three-day interbank call rate was near the Reserve Bank of India's Marginal Standing Facility rate due to early demand for funds from primary dealerships, dealers said. Banks demanded higher lending rates due to a fall in liquidity, and, with cash effectively tied up in the bidding process for SBI Funds Management's initial public offering, they said.

At 1010 IST, the three-day call rate was at 5.45%, down from 5.50% for one-day loans Thursday. The weighted average call rate was at 5.45%, up from 5.35% Thursday. The volume in the most-traded contract was INR 90.95 billion, compared with INR 101.61 billion at 1030 IST Thursday.

At 1010 IST, the tri-party repo rate for three-day loans was at 5.28%, down from 5.50% for one-day loans Thursday. The weighted average rate was 5.30%, down from 5.32% Thursday. The volume in the tri-party market was INR 1.65 trillion, compared with INR 2.72 trillion at 1030 IST Thursday. The outlook for rates for the rest of the day would be heavily influenced by the subscription at the RBI's variable rate repo auction at 0930-1000 IST, dealers said.

"There is plenty of demand for funds. The VRR will be easily subscribed, we could even have one more," a dealer at a state-owned bank said. "Liquidity is concentrated in the hands of only a few banks after the IPO, so rates have gone higher."

The RBI conducted a three-day VRR auction for a notified amount of INR 750 billion. An Informist Poll median showed expectation of full subscription at a cut-off rate of 5.26% as money market rates are higher than the expected cut-off, dealers said. Some traders see the possibility of an oversubscription prompting the central bank to conduct another auction to inject liquidity, they said. 

Banks had bid for the SBI Funds Management's marquee IPO worth over INR 98 billion through the qualified institutional buyer route on the last day of subscription. Moreover, some amount of deposits linked to the accounts of retail bidders for the public offering were blocked until the beginning of next week under Securities and Exchange Board of India rules, dealers said.

The RBI's net liquidity absorbed, which is a proxy for banking system liquidity surplus, was INR 831.96 billion Thursday, down from INR 1.31 trillion Wednesday, according to the latest data. Banks increased their cash balances with the RBI by about INR 427 billion overnight to INR 8.11 trillion Thursday, leading to the fall in the surplus, dealers said. While no major inflows or outflows were scheduled Thursday or Friday, dealers said the RBI's dollar sales in the spot market were having the effect of draining banking system rupee liquidity and putting further pressure on money market rates.  End

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

Edited by Saji George Titus

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