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Informist, Tuesday, Aug. 4, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00%, and lower than Monday's close amid lack of significant outflows and as systemic liquidity rose to its highest in over three months. Liquidity is seen rising further within the next couple of weeks, with expectations of hefty foreign inflows through foreign currency non-resident bank deposits, dealers said. Some view the current ample liquidity conditions as short-lived and, hence, liquidity is unlikely to see intervention by the RBI, while others expect the RBI to begin variable rate reverse repo operations to drain frictional liquidity. 

 

Outflows for tax deducted at source are likely to drain around INR 500 billion this week, a minor outflow compared to the current liquidity surplus, dealers said. Traders, especially from banks, had little need to borrow funds amid the ample surplus, leading to lower volumes, dealers said. Larger focus is now on the RBI's Monetary Policy Committee meeting decision Wednesday.  

 

"I think the governor will give some sort of vague commentary on draining liquidity tomorrow (Wednesday) and then this week itself they can start VRRRs. I was expecting one yesterday (Monday) itself," a dealer at a foreign bank said.

 

Traders also assessed the Insurance Regulatory and Development Authority of India's norms notified Thursday that allowed insurers to borrow in the repo market, with some insurers unlikely to resort to such borrowing unless in dire need of funds, while others said insurers may borrow funds to purchase long-term government bonds, dealers said. 

 

"I'm hearing from insurers that they're not willing to come to borrow here aggressively," a dealer at a private-sector bank said. "Some of them operationally have it all set up, but it seems to be a last-minute funding avenue."

 

The one-day call money rate ended at 4.60% Tuesday, down from Monday's close of 5.10% for one-day loans. The weighted average call rate was 5.06%, down from 5.10% Monday. Market volume was INR 131.32 billion Tuesday, slightly lower than INR 140.41 billion in the previous session. The one-day tri-party repo rate ended at 4.90%, down from 5.00% for one-day loans Monday. The weighted average rate was 4.88%, much lower than the previous day's 4.94%. The volume in the TREPS market was INR 4.42 trillion, slightly lower than INR 4.67 trillion the previous session.

 

OUTLOOK

On Wednesday, the one-day interbank call money rate is seen near the RBI's repo rate of 5.25% as traders await RBI Governor Sanjay Malhotra's monetary policy statement at 1000 IST. Traders expect the Monetary Policy Committee to keep the repo rate unchanged at 5.25% while retaining the policy stance at "neutral". However, some traders expect the governor's statement to set the stage for drawing out excess liquidity, beginning with variable-rate reverse repo operations as early as this week. Traders do not expect measures to drain durable liquidity such as a hike in the cash reserve ratio or RBI sales of government bonds yet. A few dealers speculate a dollar-rupee sell-buy swap.   

 

If the policy rate is left unchanged and the RBI does not provide commentary on liquidity-draining measures, the overnight borrowing rates are likely to slide to near the SDF rate by end of the session on low demand for funds amid lack of major outflows, dealers said. Surplus liquidity is seen remaining comfortable due to inflows from foreign currency non-resident bank deposits, dealers said. Dealers expect the call rate at 4.60–5.55% Wednesday. The tri-party repo rate is expected to be in the 4.60–5.40?nd. The weighted average call rate is expected to be in the 5.00–5.25?nd, and that in the tri-party repo market is likely to be similar, they said.

 

CALL RATE

4.60%--Tuesday close for one-day loans

5.10%--Tuesday open for one-day loans

5.10%--Monday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.09	5.14
3-day	--	--
14-day	5.76	5.79
1-month	6.08	6.09
3-month	6.58	6.61

 

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India Call:Below RBI's SDF rate, volume dn as surplus liquidity at 3-mo high

 

MUMBAI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to weak demand for funds from banks, with systemic liquidity at an over-three-month high, dealers said. Both lenders and borrowers were also cautious ahead of the Reserve Bank of India's Monetary Policy Committee's decision on Wednesday, they said. 

 

At 1605 IST, the one-day call rate was at 4.80%, down from 5.10% at the open and at Monday's close. The weighted average call rate was 5.07%, down from 5.10% Monday. The trade volume was at INR 122.51 billion, against INR 123.26 billion at 1530 IST Monday. 

 

At 1600 IST, the tri-party repo rate for one-day loans ended at 4.90%, down from 4.96% at the open and 5.00% at Monday's close. The weighted average rate was 4.88%, down from 4.94% Monday, below the SDF rate for the second straight day. The volume in the tri-party repo market was INR 4.42 trillion, down from INR 4.67 trillion Monday. 

 

"There is not a lot of demand right now. Borrowers are not that many," a dealer at a state-owned bank said. "It is the same reason why both rates and volumes are down. All banks have comfortable liquidity with them."

 

The net liquidity absorbed by the RBI – proxy for liquidity surplus – was at INR 2.44 trillion Monday, up from INR 1.93 trillion on Sunday as banks reduced their cash balance with the RBI, dealers said. Cash balances with the RBI as on Monday were at INR 8.57 trillion, down from INR 9.04 trillion Sunday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.   

 

With surplus liquidity rising to its highest since May owing to inflows into foreign currency non-resident bank deposits and government spending, traders widely expect the central bank to conduct variable rate reverse repo operations in the coming weeks to prop up the call money rate and prevent it from falling below the SDF rate. They await the remarks of the RBI top brass on liquidity management following the monetary policy review, where the policy rate and stance are seen unchanged at 5.25% and neutral, respectively. However, the RBI did not seem to want to proactively drain liquidity as it had allowed the weighted average call rate – the operating target of monetary policy – to fall below 5.10% on both Monday and Tuesday, when the meeting was in progress, dealers said.  (Aaryan Khanna)

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India Call: Near RBI SDF rate on comfortable liquidity; mkt divided on VRRR

 

MUMBAI – The one-day interbank call money rate was near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to low demand for funds from banks amid comfortable liquidity surplus in the banking system, dealers said. However, they expect the tri-party repo rate, which is below the Standing Deposit Facility rate currently, to rise slightly by 5-10 basis points due to credit disbursements, dealers said. This will also push up the call money rate, they said.  

 

"TREPs (tri-party repo rate) are likely to rise because of outflows of disbursements," a dealer at a small finance bank said. "Banks are looking to invest their funds so they are lending. This is likely to push up TREPs, eventually call," the dealer said. Primary dealerships were borrowing in the call market to meet daily requirements while all banks were on the lending side.  

 

At 0940 IST, the tri-party repo rate for one-day loans was at 4.96%, down from 5.00% Monday. The tri-party repo rate opened at 4.96%, the lowest opening level since Apr. 27, according to data available on Cogencis. The weighted average rate was 4.95%, against 4.94% Monday. The volume in the broader tri-party repo market at the same time was INR 1.30 trillion, against INR 1.25 trillion at 0930 IST Monday.

 

At 0940 IST, the one-day call rate was at 5.10%, unchanged from Monday. The weighted average call rate was 5.10%, also steady from Monday. The trade volume in the call money market was at INR 35.12 billion, against INR 7.05 billion at 0930 IST Monday.

 

The net liquidity absorbed by the RBI – proxy for liquidity surplus – was at INR 2.44 trillion Monday, up from INR 1.93 trillion on Sunday as banks reduced their cash balance with the RBI, dealers said. Cash balances with the RBI as on Monday were at INR 8.57 trillion, down from INR 9.04 trillion Sunday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.   

 

Market participants are divided on whether the RBI will announce a variable rate reverse repo due to ample liquidity in the banking system. Some dealers expect the central bank to announce one due to low rates in the overnight market. However, some dealers do not expect the RBI to conduct a VRRR auction due to scheduled outflows by the end of the current week for excise duty and tax deducted at source. 

"Liquidity is 1% of NDTL (net demand and time liabilities) and RBI is comfortable with this level," a dealer at a state-owned bank said. "In April, when rates were lower for almost a week, they (RBI) didn't announce any VRRR, it came up with one only when liquidity went to 5 lakh (crore) (INR 5 trillion)," the dealer said.  

 

Among those dealers who expect a VRRR, a few said the Mumbai Interbank Outright Rate for overnight should fall to 5.08% for the RBI to announce a VRRR. Monday, the overnight Mumbai Interbank Outright Rate was 5.14%.  End

 

US$1 = INR 95.3775

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

 

Edited by Deepshikha Bhardwaj

 

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