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Informist, Friday, Jul. 17, 2026

 

By Cassandra Carvalho

 

MUMBAI – The three-day interbank call money rate ended near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% Friday, but a tad lower than Thursday's close, due to a fall in surplus liquidity and a large amount of funds locked in the initial public offering of SBI Funds Management, the release of which is due Monday. However, money market rates largely traded at the lower end of the Liquidity Adjustment Facility corridor in the second half of trade, with some banks having surplus funds due to inflows from foreign currency non-resident bank deposits, and some mutual funds also sitting on cash, dealers said. 

 

Surplus liquidity likely reduced due to the RBI's intervention in the foreign exchange spot market, dealers said. The RBI conducted two variable rate repo operations Friday, as several traders were expecting, after the first operation for INR 750 billion was oversubscribed for INR 1.10 trillion. However, by the time of the second VRR of INR 500 billion, rates in the tri-party repo market had cooled below the repo rate, offering a cheaper alternative than the VRR, dealers said. The second three-day VRR was poorly subscribed at INR 8.16 billion. 

 

Small banks which have not received large inflows through foreign currency non-resident bank deposits were borrowers in money markets and at the VRRs, dealers said. Some banks which also did not have enough cash after participating in the IPO of SBI Funds Management were also borrowers. 

 

"Most of the banks have bid through us for the IPO, so we have enough funds, many banks have coordinated with each other," a dealer at a private sector bank said. "But whoever hasn't, must be facing an issue and borrowing in VRR."

 

The three-day call money rate ended at 5.40% Friday, slightly lower than 5.50% at one-day close Thursday. The weighted average call rate was 5.40%, up from 5.35% Thursday. The volume in the market was INR 220.00 billion Friday, slightly lower than INR 212.29 billion Thursday. The three-day tri-party repo rate ended at 4.90%, down from 5.50% for one-day loan Thursday. The weighted average rate was 5.17%, much lower than the previous day's 5.32%. The volume in the TREPS market was INR 4.74 trillion, similar to INR 4.71 trillion in the previous session.

 

OUTLOOK

On Saturday, the two-day interbank call money rate is seen below the RBI's repo rate of 5.25% in thin trade, as is usually seen Saturdays. On Monday, demand for funds is likely to be high as outflows of around INR 1.8 trillion for goods and services tax payments begin Monday. Late Monday, funds locked up in the initial public offering of SBI Funds Management will be released. Traders have mixed views on whether the IPO will aid or erode surplus liquidity in the banking system. Some expect outflows if foreign investors do not get alloted stock, while some expect both anchor investment and qualified institutional purchases by foreign investors to boost rupee liquidity. Some traders expect Amundi India, which is selling 3.7% stake in the asset management company, to transfer cash it receives from the IPO offshore. The RBI will conduct a seven-day VRR Monday for INR 1.25 trillion, which is what several traders were expecting. 

 

Dealers expect the call rate to be at 4.60–5.20% Saturday. The tri-party repo rate is expected to be in the 4.60–5.10?nd. The weighted average call rate is expected to be in the 4.90–5.10?nd, and that in the tri-party repo market is likely to be in the 5.00–5.10?nd, they said.

 

CALL RATE

5.40%--Friday close for three-day loans

5.40%--Friday open for three-day loans

5.50%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.44	5.36
3-day	--	--
14-day	5.78	5.75
1-month	6.05	6.03
3-month	6.58	6.56

 

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India Call: Near RBI's MSF rate on early demand from PDs, tight liquidity

 

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. (Aaryan Khanna)

 

End

 

US$1 = INR 96.28

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

 

Edited by Avishek Dutta

 

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