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Informist, Friday, Jul. 31, 2026

 

By Cassandra Carvalho

 

MUMBAI – The three-day interbank call money rate ended above the Reserve Bank of India's repo rate of 5.25% amid late demand for funds from banks for month-end credit disbursements and fortnight-ending reserve requirements, dealers said. Mutual funds continued to face a slight redemption pressure, leading to the the tri-party repo rate hitting a day's high of 5.50%, the Marginal Standing Facility rate. 

 

Traders were divided on whether the RBI would conduct a variable rate repo auction Friday to cool the early spike in rates, even as the Centre's expenditure for pensions and salaries began and the systemic liquidity surplus was boosted. However, liquidity remained tight due to outflows linked to the RBI's dollar sales in the foreign exchange spot market to defend the rupee, dealers said. Further, inflows from foreign currency non-resident bank deposits led to asymmetric liquidity conditions, with only some banks receiving healthy flows, they said. 

 

"Liquidity is tight, mutual funds are facing small redemptions here and there, but banks are also facing the tightness," a dealer at a mutual fund said. 

 

Traders also assessed the impact of the RBI's directions on banks' pricing of bulk deposit rates on money market rates, the norms on which were released Thursday. Some traders said that banks could reduce borrowing in overnight and money markets, if they could set differential rates on bulk deposits. Others said that disclosure of bulk deposit rates before the start of day could led to some mismatches in funding during the session.

 

The three-day call money rate ended at 5.35% Friday, up from Thursday's close of 5.29% for one-day loans. The weighted average call rate was 5.37%, up from 5.29% Thursday. Market volume was INR 146.16 billion Friday, similar to INR 146.32 billion in the previous session. The three-day tri-party repo rate ended at 4.96%, down from 5.05% for one-day loans Thursday. The weighted average rate was 5.21%, lower than the previous day's 5.27%. The volume in the TREPS market was INR 4.73 trillion, slightly lower than INR 4.83 trillion the previous session.

 

OUTLOOK

On Saturday, the two-day interbank call money rate is seen below the RBI's repo rate of 5.25% on low demand for funds amid lack of major outflows, and in thin trade as is usually seen Saturdays. Surplus liquidity is likely to increase due to inflows from the Centre's expenditure for salaries and pensions, and foreign currency non-resident bank deposits, dealers said. Traders will also assess the drain on rupee liquidity due to the RBI's dollar sales in the foreign exchange spot market.

 

Dealers expect the call rate at 4.60–5.15% Saturday. The tri-party repo rate is also expected to be in the 4.60–5.15?nd. The weighted average call rate is expected to be in the 4.70–5.10?nd, and that in the tri-party repo market is likely to be in a similar range, they said.

 

CALL RATE

5.35%--Friday close for three-day loans

5.42%--Friday open for three-day loans

5.29%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.41	5.34
3-day	--	--
14-day	5.80	5.80
1-month	6.09	6.08
3-month	6.64	6.63

 

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India Call: Near RBI's MSF rate on fortnight, month-end needs

 

--India 3-day tri-party repo opens 5.50%, highest since May 4 overnight rate 

--Dealers: Money mkt traders split on need for RBI to conduct VRR Fri 

--Dealers: RBI may not hold VRR tender Fri on liquidity surplus, govt spend 

--Dealers: RBI may hold up to INR 750 bln 3-day VRR tender to cool rates Fri 

 

MUMBAI – The three-day interbank call money rate was near the Reserve Bank of India's Marginal Standing Facility rate of 5.50%, tracking the rise in the tri-party repo rate, dealers said. Demand for funds to meet fortnight-end and month-end requirements also pushed up the call and the tri-party repo rate despite comfortable liquidity surplus in the banking system, they said.

 

However, the market is divided about whether the RBI will conduct a variable repo rate auction later Friday. Some market participants expect the RBI to conduct a three-day VRR auction for INR 250 billion to INR 750 billion Friday as the overnight rates remain near the higher-end of the Liquidity Adjustment Facility corridor. On the other hand, some do not expect a VRR Friday due to comfortable systemic liquidity and expected inflows through the government's month-end spending for salaries and pensions later during the day.   

 

At 1008 IST, the three-day call rate was 5.42%, against 5.29% Thursday for one-day loans. The weighted average call rate was 5.42%, higher than 5.29% Thursday. The volume at the same time was INR 52.34 billion, compared with INR 48.94 billion at 1030 IST Thursday.

 

"Call opened in line with TREPs (tri-party repo rate)," a dealer at a state-owned bank said. Although the tri-party repo rate opened at 5.50%, it was only for one trade and later cooled to near the policy rate of 5.25%, the dealer said. The volume for this trade was just INR 5 billion and dealers said it could be an error trade.  

 

At 1008 IST, the tri-party repo rate for three-day loans was 5.28%, higher than 5.05% Thursday. The weighted average rate was 5.30%, compared to 5.27% Thursday. The volume in the tri-party market at the same time was INR 2.04 trillion, compared with INR 2.76 trillion at 1030 IST Thursday.

 

The tri-party repo rate for three-day loans dealt at 5.50%, the highest opening level since May 4, which was for one-day loans. Three-day rates on Fridays and other weekdays are not comparable as they are the most wide contracts before the weekend. 

 

The RBI's net liquidity absorbed – a proxy for the systemic liquidity surplus – was INR 1.30 trillion Thursday, up from INR 1.16 trillion Wednesday due to some inflows from government month-end spending, dealers said. Cash balances with the RBI also rose to INR 8.19 trillion Thursday from INR 7.91 trillion Wednesday.

 

Dealers said although there were inflows through the government's month-end spending Thursday, they expect more inflows later during the day and over the weekend, which will push the systemic liquidity. The inflows through foreign currency non-resident bank deposits also support the banking system's liquidity.  

 

Dealers expect the weighted average call rate to be around 5.40% for Friday and the weighted average rate for the tri-party repo market to be around 5.25%. They expect the call rate to fall later during the day after meeting the demand for funds in early trade but expect a higher weighted average rate as most volume is expected to be traded above the RBI's repo rate. (J. Navya Sruthi)

 

End

 

US$1 = INR 95.3800

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

 

Edited by Akul Nishant Akhoury

 

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