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Informist, Monday, Aug. 10, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's repo rate and close to the Standing Deposit Facility rate despite two variable rate reverse repo operations conducted by the central bank Monday amid surplus liquidity, dealers said. The Reserve Bank of India conducted two VRRRs Monday of different tenures, both of which saw subscription of about 50%, despite the net liquidity absorption by the RBI hovering around INR 3.5 trillion. After market hourst, the RBI said it would conduct a three-day VRRR of INR 1.25 trillion Tuesday.

 

Traders prefer shorter-tenure VRRRs, which is why subscription at the seven-day operation Monday was moderate. However, when the central bank announced an overnight VRRR, by then several traders had already deployed funds elsewhere, such as in credit or overnight borrowing markets, dealers said. "It was late by the time RBI announced the overnight one, around 11:30 (am), 12:00 (pm)," a dealer at a state-owned bank said. "By then everyone has already deployed their funds." 

 

With money market rates seen volatile amid initial public offerings, tax payments and inflows through foreign currency non-resident (bank) deposits in the month ahead, primary dealerships chose to borrow in the term-money market to avoid facing the brunt of volatile rates amid fluctuations in liquidity, dealers said. There were three trades totalling INR 3.55 billion in the 17-day tenure, the most in the tenure since Jul. 17, with the weighted average rate for the tenure at 5.79%.

 

However, since the call money rates are currently closer to the SDF rate than the repo rate, the spread between term-money rates and the overnight rate has increased. The spread between the weighted average overnight and 17-day tenure widened to about 70 basis points Monday, from 54 bps on Jul. 27. "We're seeing more term-money borrowing from PDs now because of IPOs, etc, in the 17-day, 18-day, 15-day tenures. But the spread has actually increased since now the call is closer to SDF than repo," a dealer at a private sector bank said.      

 

Speculation of the RBI conducting measures to drain durable liquidity has risen amid the current surplus liquidity, dealers said. The average net liquidity absorbed by the RBI — an indicator of the liquidity surplus — has been INR 3.02 trillion so far this month. Some expect the RBI to sell government bonds, while others expect a Market Stabilisation Scheme, which the central bank launched in 2004. In such a scheme, the Centre issues short-term debt securities and the amount raised is locked up by the RBI. The only expense for the government is the interest payout on the securities. A hike in the cash reserve ratio is seen unlikely, as such a move is seen as counter-productive at a time the RBI is pushing for foreign inflows, such as through FCNR(B) deposits, which are exempt from such regulatory requirements. There is also a skew in banks receiving inflows through FCNR(B) deposits, dealers said. 

 

The one-day call money rate ended at 5.09% Monday, inching lower from 5.10% for three-day loans Friday. The weighted average call rate was 5.09%, unchanged from Friday. Market volume was INR 146.38 billion Monday, down from INR 170.57 billion in the previous session. The one-day tri-party repo rate ended at 4.80%, down from 5.00% for three-day loans Friday. The weighted average rate was 4.99%, marginally up from 4.96% Friday. The volume in the TREPS market was INR 4.37 trillion, slightly higher than INR 4.12 trillion the previous session.

 

OUTLOOK

On Tuesday, the one-day interbank call money rate is seen below the RBI's repo rate of 5.25?spite the three-day VRRR amid ample surplus liquidity. Some banks may have low cash in hand due to a slew of initial public offerings, dealers said. Traders will also track remarks from Reserve Bank of India Governor Sanjay Malhotra at the Financial Institution Benchmarking and Calibration Conference organised by the Federation of Indian Chambers of Commerce and Industry and Indian Banks' Association Tuesday. Most expect his remarks to align with his policy statement last week. The governor could perhaps offer clarity on the timeline of the FCNR(B) deposit facility, after traders largely dismissed a media report Monday that said the facility could be closed earlier than the Sept. 30 deadline, dealers said.

 

Liquidity is seen remaining comfortable due to inflows from FCNR(B) deposits, at least until outflows for goods and services tax begin in the latter half of the month, dealers said. Core systemic liquidity surplus could hit INR 9 trillion if inflows from FCNR(B) deposits continue to grow at a robust pace. Dealers expect the one-day call rate at 4.60–5.25% Tuesday. 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 5.05–5.25?nd and the tri-party repo rate is likely to be 4.90-5.15%, dealers said. 

 

CALL RATE

5.09%--Monday close for one-day loans

5.15%--Monday open for one-day loans

5.10%--Friday close for three-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.13	5.14
3-day	--	--
14-day	5.76	5.73
1-month	6.06	6.05
3-month	6.59	6.59

 

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India Call: Below SDF rate despite 2 VRRR auctions amid ample liquidity

 

MUMBAI – The interbank call money market rate for one-day loans was below the Reserve Bank of India's Standing Deposit Facility rate of 5.00?spite two variable rate reverse repo auctions by the central bank. The tri-party repo rate for one-day loans was also below the lower end of the RBI's liquidity adjustment facility corridor on low demand for funds amid ample liquidity surplus.

 

The RBI conducted two VRRR auctions Monday, one for seven days and the other an overnight auction. At the seven-day INR-2-trillion VRRR auction, the central bank took all offers for INR 958.10 billion, which was less than 50% of the total amount. Market participants were expecting offers of more than INR 1 trillion at the auction. According to an Informist Poll, the median estimate for the auction was INR 1.25 trillion. The low subscription was mainly because the auction was for seven days.

 

The RBI then announced a second VRRR auction for a shorter tenure. At the overnight INR 1-trillion VRRR auction, the central bank took all offers worth INR 586.71-billion. Though the market was looking forward to a shorter-tenure VRRR auction, the overnight one was not fully subscribed either because most of the borrowing for the day was done, dealers said. "After announcement we have seen call (money market rate) moving from 4.90% to 5.15% level," a dealer at a foreign bank said. "But people are done with most of the volumes for the day." 

 

Some dealers speculated that some state-owned banks asked the central bank for an overnight auction as they received inflows through foreign currency non-resident (banks) deposits. "Right now banks have no lucrative investment options available... so VRRR is what they are looking forward to," a dealer at a state-owned bank said. 

 

The net liquidity absorbed by the RBI--an indicator of the liquidity surplus--was INR 3.49 trillion Sunday, against INR 3.50 trillion Saturday and Friday and down from INR 3.61 trillion Thursday. Dealers expect the central bank to conduct more VRRR auctions until the outflows for goods and services tax payments start around Aug. 20 to keep the weighted average call rate near the RBI's operating target, which is the policy rate. Dealers expect the RBI to conduct overnight or two-day VRRR auctions as market participants prefer shorter-tenure reverse repo auctions over longer-tenure ones.

 

Dealers see the weighted average call rate at 5.06-5.10% for Monday and hence expect the RBI to announce another VRRR auction for INR 1 trillion Tuesday. At 1428 IST, the one-day call rate was at 4.85%, down from 5.10% for three-day loans Friday. The weighted average call rate was 5.11%, up from 5.09% Friday. The trade volume in the same contract was at INR 108.17 billion, against INR 125.86 billion at 1435 IST Friday.

 

At 1429 IST, the tri-party repo rate for one-day loans was at 4.84%, against 5.00% for three-day loans Friday. The weighted average rate was 5.02%, against 4.96% Friday. The volume in the broader tri-party repo market at the same time in the same contract was INR 3.71 trillion, against INR 3.50 trillion at 1430 IST Friday.  (J. Navya Sruthi)

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India Call: Below repo on ample liquidity; RBI conducts 7-day VRRR

 

MUMBAI – The one-day interbank call was below the Reserve Bank of India's repo rate of 5.25% Monday due to ample liquidity in the banking system despite the central bank's announcement of a variable rate reverse repo auction, dealers said. The tri-party repo rate was near the RBI's Standing Deposit Facility rate of 5.00%. The RBI conducted a VRRR auction for INR 2.00 trillion at 0930-1000 IST to push up the rates, dealers said.

 

However, dealers do not expect the RBI's seven-day VRRR to be fully subscribed due to longer tenure. According to the median of nine participants in an Informist Poll, dealers expect total offers between INR 700 billion and INR 1.78 trillion at the auction, with a median estimate of INR 1.25 trillion. All estimates of the cut-off were at 5.24%. 

 

"Two things, it is for seven days and another is the timing of the auction because of which there may not be good subscription," a dealer at a foreign bank said. "Early in the day market is yet to get an idea about fund management for the day, so we don't see full subscription... even volumes are lower so can't expect it," the dealer said. 

 

The central bank's four-day VRRR tender from Thursday reversed Monday and returned INR 1.30 trillion to banks. The net liquidity absorbed by the RBI--a proxy for liquidity surplus--fell slightly to INR 3.50 trillion Friday, down from INR 3.61 trillion Thursday.

 

At 1010 IST, the one-day call rate was at 5.15%, up from 5.10% for three-day loans Friday. The weighted average call rate was 5.15%, up from 5.09% Friday. The trade volume in the call money market was at INR 12.90 billion, against INR 66.79 billion at 1030 IST Friday.

 

At 1012 IST, the tri-party repo rate for one-day loans was at 5.03%, against 5.00% for three-day loans Friday. The weighted average rate was 5.08%, against 4.96% Friday. The volume in the broader tri-party repo market at the same time was INR 1.98 trillion, against INR 2.10 trillion at 1030 IST Friday.

 

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

 

End

 

US$1 = INR 95.30

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

 

Edited by Saji George Titus

 

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