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Informist, Friday, Aug. 7, 2026

 

By Cassandra Carvalho

 

MUMBAI – The three-day interbank call money rate ended near the Reserve Bank of India's Standing Deposit Facility rate Friday, but inching higher from its close for one-day loans Thursday. The lack of a variable rate repo auction coupled with ample surplus liquidity led to overnight borrowing rates trading below the repo rate Friday. The three-day call money rate did not rise above 5.15% Friday. 

 

Systemic liquidity improved on inflows from foreign currency non-resident (bank) deposits, along with a drop in cash balances. Borrowing during the day was largely due to the initial public offerings, dealers said. The next week is likely to see upward pressure on overnight borrowing rates due to several IPOs lined up, some of which are large, dealers said. Even as systemic liquidity is in an ample surplus, a large amount of funds will be locked up in IPOs, they said. 

 

"Today (Friday) the IPO of Ardee (Ardee Industries) closed. QIB (quota for qualified institutional buyers) was subscribed 200 times; for a size of 300 crore (INR 3 billion). So that's 60,000 crores (INR 600 billion) locked up in just this one IPO and there are some big ones on the mainboard next week," a dealer at a private sector bank said. Several traders are waiting for the IPO of Dhoot Transmission, they said. 

 

Outflows for excise duty and tax deducted at source will drain systemic liquidity by about INR 600 billion over the weekend, dealers said. There is growing speculation that the RBI will have to conduct measures to drain systemic liquidity on a durable basis by the end of September, even after RBI Governor Sanjay Malhotra allayed those expectations Wednesday by saying the surplus liquidity will be short-lived. Traders expect inflows through the RBI's schemes to top $100 billion. Core liquidity could rise to about INR 9 trillion in the near-term, dealers said, a large sum for which VRRRs may not be enough to drain liquidity. Expectations of open market operations by the RBI to sell government bonds have risen, with a hike in the cash reserve ratio seen unlikely due to a skew in banks receiving inflows through FCNR(B) deposits, dealers said. A few traders also expect measures such as issuance of cash management bills.  

 

The three-day call money rate ended at 5.10% Friday, up from 5.00% for one-day loans Thursday. The weighted average call rate was 5.09%, down from 5.18% Thursday. Market volume was INR 170.57 billion Friday, higher than INR 141.53 billion in the previous session. The three-day tri-party repo rate ended at 5.00%, the same as the close for one-day loans Thursday. The weighted average rate was 4.96%, down from 5.02% Thursday. The volume in the TREPS market was INR 4.12 trillion, slightly lower than INR 4.23 trillion the previous session.

 

OUTLOOK

The call money market is shut on Saturday. On Monday, the one-day interbank call money rate is seen near the RBI's repo rate of 5.25%, with early demand for funds from primary dealerships for payment of INR 320 billion for the gilt auction conducted Friday. Due to a slew of initial public offerings, even as system-wide liquidity will be in a comfortable surplus, funds available with banks in hand are seen tight, dealers said. However, in line with traders' expectations, the RBI said in post-market hours that it will conduct a seven-day variable rate reverse repo operation of INR 2 trillion Monday, seen as an operation to roll over the four-day VRRR, which matures Monday and was subscribed at INR 1.30 trillion.  

 

While views on the trajectory of systemic liquidity remain mixed, traders are pricing out expectations of a hike in the repo rate in October after "dovish" commentary Wednesday. Liquidity is seen remaining comfortable due to inflows from foreign currency non-resident (bank) deposits, at least until outflows for goods and services tax begin in the latter half of the month, dealers said. Dealers expect the one-day call rate at 4.60–5.25% Monday. The one-day tri-party repo rate is expected to be in the 4.60–5.15?nd. The weighted average call rate is expected to be in the 5.10–5.25?nd and the tri-party repo rate is likely to be 4.90-5.15%, dealers said. 

 

CALL RATE

5.10%--Friday close for three-day loans

5.12%--Friday open for three-day loans

5.00%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.14	5.24
3-day	--	--
14-day	5.73	5.74
1-month	6.05	6.06
3-month	6.59	6.60

 

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India Call: At SDF rate; ample liquidity wanes tax outflows impact on rates

 

MUMBAI – The interbank call money rate for three-day loans was at the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to low demand for funds amid ample liquidity in the banking system, dealers said. The tri-party repo rate was below the Standing deposit Facility rate due to lack of major borrowing demand. 

 

With outflows of INR 500 billion scheduled for payments of excise duty and tax deducted at source and borrowing requirement for three days, dealers expect rates to slightly inch up by the end of Fiday but remain below the repo rate of 5.25%. "Don't think excise duty outflows will have much impact on rates or liquidity as it is just 50,0000 crores (INR 500 billion)," a dealer at a private sector bank said.  

 

Dealers expect the weighted average call rate to be at 5.10-5.15% Friday. This is, however, much lower than the RBI's target of keeping the weighted average call rate near the policy rate.  

 

"With enough liquidity in system I don't think we will have a VRRR today (Friday)," a dealer at a state-owned bank said. RBI will get it on Monday, as we have reversal (of Thursday auction) it might be around 1.5-2 trillion (INR 1.5 trillion to INR 2 trillion)," the dealer said. 

 

At 1230 IST, the three-day call rate was at 5.00%, against 5.00% Thursday for one-day loans. The weighted average call rate was 5.13%, down from 5.18% Thursday. The trade volume in the same contract was INR 103.34 billion, against INR 96.31 billion at the same time Thursday.

 

At 1230 IST, the tri-party repo rate for three-day loans was at 4.95%, against 5.00% Thursday for one-day loans. The weighted average rate was 4.97%, against 5.02% Thursday. The volume in the same contract was INR 2.94 trillion, against INR 2.83 billion at the same time Thursday.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--was at INR 3.61 trillion Thursday, up from INR 3.44 trillion Wednesday as banks reduced cash balances with the RBI, dealers said. Cash balances with the RBI as on Thursday were INR 7.88 trillion, down from INR 7.91 trillion Wednesday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.  (J. Navya Sruthi)

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India Call: Below RBI's repo rate on ample liquidity; mkt divided on VRRR

 

MUMBAI – The interbank call money rate for three-day loans was below the Reserve Bank of India's repo rate of 5.25% Friday due to ample liquidity in the banking system and lack of announcement of a variable rate reverse repo auction, dealers said. The tri-party repo rate opened near the RBI's Standing Deposit Facility rate of 5.00% and fell below the level due to low demand for funds, dealers said. 

 

Market participants, however, expect the overnight rates to rise slightly during the day on the back of outflows of INR 500 billion for excise duty and tax deducted at source by noon. Although there was no announcement of a VRRR auction by the central bank, some dealers expect the RBI to conduct the auction to push up overnight rates later Friday, while others do not see it happening Friday amid outflows. 

 

"By 1130-1230 (IST), once bidding for the G-Sec auction is done, we might see a VRRR," a dealer at a private sector bank said. "The governor said the liquidity is going to be abundant, and then he also said the RBI will conduct two-way (liquidity) operations. So that way, there could be a VRRR, but participation may not be much," the dealer said. He explained that if the auction is for INR 1 trillion, then there could be just 40% participation at the auction. 

 

However, some market participants do not see a VRRR auction Friday as they expect the call rate might rise slightly due to excise duty outflows. With Friday's outflows and three-day borrowing requirements likely to push rates higher, the central bank saw no need to announce a VRRR auction, a dealer at a state-owned bank said.  

 

At 0946 IST, the one-day call rate was at 5.15%, up from 5.00% Thursday. The weighted average call rate was 5.14%, down from 5.18% Thursday. The trade volume in the call money market was at INR 43.05 billion, against INR 6.88 billion at 0930 IST Thursday.

 

At 0948 IST, the tri-party repo rate for one-day loans was at 4.96%, against 5.00% Thursday. The weighted average rate was 4.99%, against 5.02% Thursday. The volume in the broader tri-party repo market at the same time was INR 1.65 trillion, against INR 856.95 billion at 0930 IST Thursday.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--was at INR 3.61 trillion Thursday, up from INR 3.44 trillion Wednesday as banks reduced cash balances with the RBI, dealers said. Cash balances with the RBI as on Thursday were INR 7.88 trillion, down from INR 7.91 trillion Wednesday. The average daily cash reserve requirement for the fortnight ending Aug. 15 is INR 8.03 trillion.

 

Dealers expect the weighted average call rate to be at 5.10-5.15% Friday. They expect the weighted average rate in the tri-party repo market to be below the Standing Deposit Facility rate of 5.00%.  (J. Navya Sruthi)

 

End

 

US$1 = INR 95.2075

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

 

Edited by Saji George Titus

 

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