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Informist, Thursday, Aug. 6, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended Thursday at the Reserve Bank of India's Standing Deposit Facility rate, up from Wednesdayclose after the central bank held its first variable rate reverse repo operation since Apr. 17. Several traders expect the RBI to conduct a second VRRR auction this week Friday, since rates still cooled off to the SDF rate by the end of trade Thursday on ample liquidity.

So far, the RBI has not yet announced a VRRR for Friday. Some traders do not expect a VRRR Friday as the weighted average call rate climbed close to the repo rate—the central bank's operating target—Thursday after the VRRR. Additionally, around INR 600 billion for payments of tax deducted at source and excise duty may put a slight upward pressure on rates the next two trading sessions, dealers said. 

"The RBI could come up with an overnight VRRR of around 500 (INR 500 billion) tomorrow (Friday)," a dealer at a state-owned bank said. Other dealers were not convinced. "What RBI wanted to achieve reflects in today's (Thursday) rates so I don't see the need for another VRRR," a dealer at another state-owned bank said. 

Traders are also preparing funding for a line-up of several initial public offerings, some of which are large, dealers said. Dhoot Transmission, Milky Mist Dairy Food, and LEAP India are some IPOs traders are tracking. Some banks may have received rupees Thursday after swapping the inflows from their foreign currency non-resident (banks) deposits Tuesday, dealers said, and this would have increased systemic liquidity. However, some banks may make their tax payments Friday or Monday and this will offset some of these rupee inflows, dealers said.

The one-day call money rate ended at 5.00% Thursday, up from 4.60% for one-day loans Wednesday. The weighted average call rate was 5.18%, up from 5.05% Wednesday. Market volume was INR 141.53 billion Thursday, similar to INR 149.49 billion in the previous session. The one-day tri-party repo rate ended at 5.00%, almost unchanged from 5.01% for one-day loans Wednesday. The weighted average rate was 5.02%, up from 4.88%. The volume in the TREPS market was INR 4.23 trillion, slightly lower than INR 4.34 trillion the previous session.

OUTLOOK

Friday, the three-day interbank call money rate is seen near the RBI's repo rate of 5.25%, with demand for funds from primary dealerships and for three-day funding requirements ahead of the weekend, dealers said. Some traders expect the RBI to conduct a second VRRR this week as overnight borrowing rates still traded near the SDF rate inspite of the VRRR Thursday even as the weighted average rate rose. Systemic liquidity could potentially increase Thursday due to inflows through foreign currency non-resident (banks) deposits which were swapped with the RBI Tuesday, dealers said. However, this could be partly offset by outflows for excise duty and tax deducted at source of about INR 600 billion, which will take place up to Monday, they said. 

Reserve Bank of India Governor Sanjay Malhotra acknowledged Wednesday that the current surplus liquidity will be short-lived and hence erased expectations of the RBI bringing measures to absorb the liquidity surplus on a durable basis. However, some traders still expect some measures to drain durable liquidity, such as a hike in the cash reserve ratio or RBI's sales of government bonds by October. Traders are pricing out expectations of a hike in the repo rate in October after "dovish" commentary Wednesday. 

Surplus liquidity is seen comfortable due to inflows from foreign currency non-resident (banks) deposits, dealers said. Dealers expect the three-day call rate at 4.60–5.30% Friday. The three-day tri-party repo rate is expected to be in the 4.60–5.25% band. The weighted average call rate is expected to be in the 5.10–5.25% band and the tri-party repo rate is likely to be similar, dealers said. 

CALL RATE

5.00%--Thursday close for one-day loans

5.25%--Thursday open for one-day loans

4.60%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's SDF rate after VRRR; mkt expects another VRRR Fri

MUMBAI – The one-day interbank call money rate was near the Reserve Bank of India's Standing Deposit Facility rate of 5% Thursday after the central bank's variable rate reverse repo auction for INR 1.50 trillion earlier in the day, dealers said. The tri-party repo rate fell below the Standing Deposit Facility rate as the liquidity surplus remains high even after the VRRR auction, dealers said. They expect the RBI to conduct another VRRR auction Friday.

"VRRR was in line with expectations, but there is still enough liquidity," a dealer at a foreign bank said. "I won't be surprised if there will be another VRRR tomorrow (Friday), as people still have enough money. If there is no VRRR, then TREPs will open below 5% and call will be around 5.10%."

At the VRRR auction conducted Thursday between 0930 IST and 1000 IST, the RBI accepted all INR 1.30-trillion offers at a cut-off rate of 5.24%. The weighted average cut-off rate was 5.23%. The tender will be reversed Monday. 

Although there are INR 500 billion worth of outflows scheduled for Friday for excise duty and tax deducted at source, most dealers still expect another VRRR auction Friday. Dealers said the announcement of the auction will lift overnight rates and keep the weighted average call rate--RBI's operating target–-at policy rate. They expect a three-day VRRR auction for INR 500 billion to INR 1 trillion.

As always, a few dealers were contrarians and said the RBI may not conduct another VRRR auction as the weighted average call rate is likely to be at 5.18-5.20% for Thursday. With outflows expected Friday and three-day borrowing requirements, they expect the call rate to open near the policy rate on the day.

At 1420 IST, the one-day call rate was 5.10%, up sharply from 4.60% Wednesday. The weighted average call rate was 5.20%, up from 5.05% Wednesday. The trade volume in the call money market was at INR 120.54 billion, against INR 114.38 billion at 1430 IST Wednesday.

At 1421 IST, the tri-party repo rate for one-day loans was 4.87%, against 4.88% Wednesday. The weighted average rate was 5.05%, up from 4.88% Wednesday. The volume in the broader tri-party repo market at the same time was INR 3.57 trillion, against INR 3.42 trillion at 1430 IST Wednesday.

The net liquidity absorbed by the RBI--an indication of the liquidity surplus--was INR 3.44 trillion Wednesday, up from INR 3.34 trillion Tuesday, as banks reduced cash balances and inflows through coupon payments. Cash balances with the RBI as on Wednesday were INR 7.91 trillion, down from INR 7.92 trillion Tuesday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.  (J. Navya Sruthi)

India Call: At repo rate as RBI conducts VRRR amid surplus liquidity

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's repo rate of 5.25% Thursday as the central bank conducted a variable rate reverse repo auction for INR 1.50 trillion between 0930 IST and 1000 IST, dealers said. The tri-party repo rate was also near the RBI's policy rate due to the VRRR auction, dealers said. 

At 0947 IST, the one-day call rate was at 5.25%, sharply up from 4.60% Wednesday. The weighted average call rate was 5.25%, up from 5.05% Wednesday. The trade volume in the call money market was at INR 36.69 billion, against INR 21.75 billion at 0930 IST Wednesday.

At 0947 IST, the tri-party repo rate for one-day loans was at 5.13%, up from 4.88% Wednesday. The weighted average rate was 5.10%, also up from 4.88% Wednesday. The volume in the broader tri-party repo market at the same time was INR 1.33 trillion, against INR 1.30 trillion at 0930 IST Wednesday.

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--was at INR 3.44 trillion Wednesday, up from INR 3.34 trillion Tuesday. Cash balances with the RBI as on Wednesday were INR 7.91 trillion Wednesday, down from INR 7.92 trillion Tuesday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.

"It is because of VRRR overnight rates are higher today (Thursday)," a dealer at a private sector bank said. However, most market participants do not expect a full subscription at the auction Thursday due to the tenure of the auction and timing. According to the Informist poll, the subscription at the VRRR auction is expected at INR 1.0 trillion at a cut-off rate of 5.24%.  

"If VRRR was overnight or just three days, then we would have seen full subscription," a dealer at a state-owned bank said. Dealers also said the timing of the auction was just before the excise duty outflows due Friday, which is why the auction may not be fully subscribed. Outflows of INR 500 billion are scheduled Friday for excise duty and tax deducted at source.  

This is the first VRRR auction since Apr. 17 and the central bank conducted it as the weighted average call rate has been below 5.10% in the past three sessions. It comes a day after RBI Governor Sanjay Malhotra announced two-way liquidity operations would be used to keep the weighted average call rate – the operating target of monetary policy – near the policy repo rate of 5.25%.

During the day, the call money rate for one-day loans is expected to at repo rate and later in the lower-end of the Liquidity Adjustment Facility corridor after meeting the regular borrowing requirements for the day, dealers said. The weighted average call rate is seen at 5.15-5.25% for Thursday.  (J. Navya Sruthi) 

End

US$1 = INR 95.22

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

Edited by Pankaj Aher

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