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Informist, Tuesday, Aug. 11, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's repo rate and near the Standing Deposit Facility rate Tuesday, similar to Monday's close, amid low demand for funds and comfortable surplus liquidity, dealers said. Of the roughly INR 3 trillion net liquidity absorbed by the RBI--an indicator for the liquidity surplus—-INR 1.78 trillion is currently parked in variable rate reverse repo operations conducted by the central bank. The RBI will conduct its fifth VRRR this week Wednesday, for INR 750 billion, the central bank said in a release after market hours. 

 

Even with two VRRRs conducted by the central bank Tuesday, the weighted average call and tri-party rates were near the SDF rate, with no major demand for funds from banks, and mutual funds sitting flush with cash, dealers said. "There seems to be a disparity between the rates and the liquidity, because even though funds are being parked in the VRRRs, rates are still low because borrowing demand from banks has come down," a dealer at a state-owned bank said. 

 

Some traders also preferred to keep funds at hand amid several initial public offerings this week, though none of the offerings are of a size that could cause a system-wide cash crunch, dealers said. 

 

The one-day call money rate ended at 5.08% Tuesday, inching lower from 5.09% for one-day loans Monday. The weighted average call rate was 5.09%, unchanged for the third consecutive session. The volume in the market was INR 163.99 billion, up from INR 146.38 billion in the previous session. The one-day tri-party repo rate ended at 5.01%, up from 4.80% for one-day loans Monday. The weighted average rate was 4.98%, marginally down from 4.99% Monday. The volume in the TREPS market was INR 4.17 trillion, slightly lower than INR 4.37 trillion the previous session.

 

OUTLOOK

Wednesday, the one-day interbank call money rate is seen below the RBI's repo rate of 5.25% amid ample surplus liquidity. Liquidity is seen remaining comfortable due to inflows through foreign currency non-resident (banks) 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. Traders estimate inflows from these deposits to have hit about $45 billion as of this week from Jun. 8. Dealers expect the one-day call rate at 4.60–5.25% Wednesday. 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 5.05–5.20?nd and the tri-party repo rate is likely to be 4.90-5.15%, dealers said.

 

CALL RATE

5.08%--Tuesday close for one-day loans

5.15%--Tuesday open for one-day loans

5.09%--Monday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.13	5.13
3-day	--	--
14-day	5.79	5.76
1-month	6.06	6.06
3-month	6.57	6.59

 

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India Call: Below SDF; VRRRs seen continuing despite 53% avg subscription

 

MUMBAI – The one-day interbank call money rate traded below the Reserve Bank of India's Standing Deposit Facility rate even after the central bank conducted two variable rate reverse repo operations to drain frictional liquidity Tuesday. For at least the next two weeks, traders expect the central bank to continue opting for VRRRs and refraining from measures to drain durable liquidity even as subscription at these operations is moderate, dealers said. The average subscription at the VRRRs conducted since Thursday has been merely 53%, while the average net liquidity absorbed by the RBI--a proxy for liquidity surplus—has been INR 3.46 trillion in the same period.  

 

Rates traded near the SDF rate with most banks having a comfortable surplus due to inflows from foreign currency non-resident (bank) deposits, dealers said. Participation at the VRRRs is also not aggressive since banks prefer to park funds to earn higher returns in certificates of deposit, commercial paper or in mutual funds, dealers said. Some banks are also participating in a slew of initial public offerings this week and, therefore, do not wish to lock up funds in VRRRs. The IPOs of Dhoot Transmission, Milky Mist and Molbio Diagnostics are being tracked by traders. Further, given the surplus liquidity, banks are also amping up credit disbursements, though system-wide credit demand is only seen picking up nearing the festive season from September. 

 

"Banks are putting money into credit offtake because now they have that surplus liquidity due to (FCNR) inflows," a dealer at a state-owned bank said.  

 

Traders also noted that the central bank has conducted VRRRs of varying tenures, likely in an effort to garner higher subscription, they said. Most traders prefer short-term VRRRs such as overnight operations. The RBI since last week has conducted overnight, three-day, four-day and seven-day VRRRs.  

 

At 1508 IST, the one-day call rate was at 4.90%, down from 5.09% for one-day loans Monday. The weighted average call rate was 5.11%, up from 5.09% Monday. The trade volume in the same contract was at INR 118.77 billion, against INR 107.71 billion at 1430 IST Monday.

 

At 1508 IST, the tri-party repo rate for one-day loans was at 4.93%, against 4.80% for one-day loans Monday. The weighted average rate was 5.00%, against 4.99% Monday. The volume in the broader tri-party repo market at the same time in the same contract was INR 3.75 trillion, against INR 3.68 trillion at 1430 IST Monday.  (Cassandra Carvalho)

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India Call: Below repo rate on low demand for funds; liquidity surplus large

 

NEW DELHI – The one-day interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% Tuesday due to a large liquidity surplus in the banking system despite the central bank's consistent variable rate reverse repo auctions, dealers said. Primary dealers were borrowing funds in early trade, as usual, which banks were willing to fund below the repo rate, they said. The tri-party repo rate was hovering around the lower end of the RBI's Liquidity Adjustment Facility corridor of 5.00%.

 

Even with lower rates for lenders, there was only limited participation at the three-day, INR-1.25-trillion VRRR auction at 0930-1000 IST. The RBI accepted all offers worth INR 425.60 billion at cut-off rate of 5.24% at the auction.

 

Banks held on to extra cash to meet upcoming credit disbursal needs, dealers said. Some banks also wanted to participate in initial public offering lined up this week, where liquidity is likely to be locked up until next week even as the banking system liquidity would remain unchanged, they said. At the same time, they were more comfortable parking funds with the RBI for three days, rather than the seven-day VRRR auction that was conducted Monday, as the funds would reverse before the end of the reporting fortnight on Saturday, dealers said.

 

"Since banks are parking money in the VRRR, it looks like liquidity is a big positive but it may be concentrated," a dealer at a state-owned bank said. "So yesterday evening (Monday) it looks like some banks faced a funding crunch since MSF (marginal standing facility) borrowing is higher." Banks borrowed INR 28.52 billion from the RBI's overnight MSF window at 5.50% on Monday, up from INR 5.86 billion for various tenures on Friday.

 

At 1012 IST, the one-day call rate was at 5.15%, up from 5.09% Monday's close. The weighted average call rate was 5.15%, up from 5.09% Monday. The trade volume in the call money market rose sharply to INR 54.09 billion from INR 34.10 billion at 1030 IST Monday.

 

At 1012 IST, the tri-party repo rate for one-day loans was at 5.01%, against 4.80% at close Monday. The weighted average rate was 5.01%, against 4.99% Monday. The volume in the broader tri-party repo market at the same time was INR 2.05 trillion, against INR 2.12 trillion at 1030 IST Monday.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--fell to INR 3.19 trillion Monday from INR 3.49 trillion Sunday. The fall largely reflected the settlement on Monday of the INR-320-billion weekly gilt auction conducted Friday, dealers said. (Aaryan Khanna)

 

End

 

US$1 = INR 95.4350

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

 

Edited by Rajeev Pai

 

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