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Informist, Wednesday, Aug. 12, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's repo rate Wednesday but above Tuesday's close, inching higher on robust participation at the overnight variable rate reverse repo auction amid a flurry of initial public offerings. Both the tri-party and repo rates briefly rose above the repo rate in the afternoon. The one-day call rate hit 5.30%, the highest since Aug. 1, while the one-day tri-party repo rate hit 5.35%, its highest since Jul. 31. 

"There was good response at VRRR, so a huge chunk of excess liquidity has been sucked out," a dealer at a private sector bank said. The overnight VRRR for INR 750 billion on Wednesday saw 72% subscription, the most since the VRRR the RBI had conducted on Aug. 6, which was the first VRRR since April. 

However, with participation in several IPOs including those of Milky Mist, Molbio Diagnostics, Shiprocket and Dhoot Transmission this week, some mutual funds also refrained from lending at low rates in the tri-party repo market. Banks continued to deploy surplus funds into credit growth. Data released by the RBI Wednesday showed bank's loan growth at 19.3% on year as of Jul. 31. 

"RBI's main objective is to bring up the TREPS, call rates so he will continue bringing VRRRs for now," a dealer at a mutual fund said. Traders expect the RBI to continue holding daily VRRRs for overnight tenures. 

The one-day call money rate ended at 5.12% Wednesday, higher than 5.08% for one-day loans Tuesday. The weighted average call rate was 5.11%, against 5.09% the previous session. The volume in the market was INR 168.33 billion, similar to INR 163.99 billion in the previous session. The one-day tri-party repo rate ended at 5.02%, against 5.01% for one-day loans Tuesday. The weighted average rate was 5.04%, marginally higher than 4.98% Tuesday. The volume in the TREPS market was INR 3.97 trillion, lower than INR 4.17 trillion the previous session.

OUTLOOK

On Thursday, the one-day interbank call money rate is seen below the RBI's repo rate of 5.25% as liquidity continues to be ample amid 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. However, cash in hand may be tight nearing the end of the reporting fortnight, the upcoming holiday weekend and with funds locked up in initial public offerings, dealers said. Further, traders prefer overnight VRRRs compared to all other tenures, and the VRRR on Thursday may once again see robust subscription, dealers said. The RBI will conduct an overnight VRRR for INR 1 trillion Thursday. 

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 4.60–5.45% Thursday. The one-day tri-party repo rate is expected to be in the 4.60–5.30% band. The weighted average call rate is expected to be in the 5.05–5.20% band and the tri-party repo rate is likely to be 4.90-5.15%, dealers said.

CALL RATE

5.12%--Wednesday close for one-day loans

5.15%--Wednesday open for one-day loans

5.08%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF rate; IPO subscriptions lead to brief spike above repo

NEW DELHI – The one-day interbank call rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as early demand for funds eased, dealers said. However, sporadic demand for cash increased as banks and mutual funds got funds locked up in subcription to initial public offerings, which briefly pushed up both the call and tri-party repo rate above the policy repo rate of 5.25%, they said. 

The public offers of Dhoot Transmission and Molbio Diagnostics closed Wednesday, while Milky Mist Dairy Food's larger offering will shut Thursday. However, none of these three issuances are over INR 16 billion and the market's borrowing needs were met easily after the temporary spike, dealers said. Last month, the mammoth IPO of SBI Funds Management of nearly INR 100 billion had locked up a large chunk of banking system liquidity at a time when the systemic liquidity surplus was lower.

"Since the IPOs are only of a limited size, there will not be a systemic pressure across banks," a dealer at a private sector bank said. "So, I don't think that any of these spikes will sustain beyond a day or two." The overnight call money rate hit a high of 5.30% and the tri-party repo rate a high of 5.35% during the day.

At 1645 IST, the one-day call rate was at 4.85%, down from 5.15% at the open and 5.08% at close Tuesday. The weighted average call rate was 5.12%, up from 5.09% Tuesday. The trade volume in the same contract was at INR 143.99 billion, against INR 125.24 billion at 1630 IST Tuesday.

At 1600 IST, the tri-party repo rate for one-day loans was at 5.02%, marginally higher than 5.01% at open and the same at Tuesday's close. The weighted average rate was 5.04%, up from 4.98% Tuesday. The volume in the broader market for the overnight contract was INR 3.97 trillion, lower than INR 4.12 trillion Tuesday. 

At the overnight variable rate reverse repo auction for INR 750 billion, the RBI accepted all offers of INR 538.45 billion at a cut-off rate of 5.24%. The subscription was slightly higher than the median of INR 500 billion in an Informist poll, but did not have a significant impact on secondary market rates or volumes, dealers said.

Most banks had kept a surplus of cash balances with the RBI earlier this fortnight and were not looking to increase those even nearing the end of the reporting fortnight Saturday, they said. On average, banks have maintained an average daily cash balance of INR 8.13 trillion in the Aug. 1-11 period, hgiher than regulatory requirements of INR 8.30 trillion. Separately, the net liquidity absorbed by the RBI--a proxy for liquidity surplus--rose to INR 3.35 trillion Tuesday from INR 3.19 trillion Monday.  (Aaryan Khanna)

India Call: Below repo rate as liquidity surplus rises; PDs' borrowing down

NEW DELHI – The one-day interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% as banks lent funds to primary dealers cheaply due to the rise in surplus liquidity in the banking system, dealers said. There was less than usual demand from primary dealers as well, they said. The tri-party repo market exemplified the easy funding conditions as its rate hovered around the Standing Deposit Facility of 5.00%, the lower end of the Liquidity Adjustment Facility corridor.

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--rose to INR 3.35 trillion Tuesday from INR 3.19 trillion Monday. Banks converted their dollar-denominated inflows from foreign currency non-resident (banks) deposits into rupee liquidity, which helped the liquidity surplus, dealers said. However, the RBI's regular dollar sales in the spot market over the past two weeks limited the rise in the systemic surplus, they said.

"The domestic side is now getting consistent FCNR(B) inflows and converting them on a weekly basis with the RBI," a dealer at a private-sector bank said. "The problem is that he (RBI) is also intervening heavily in FX (foreign exchange market) and that is helping the rupee but keeping the surplus below INR 3.5 trillion." 

At 1000 IST, the one-day call rate was at 5.15%, up from 5.08% at Tuesday's close. The weighted average call rate was 5.15%, up from 5.09% Tuesday. The trade volume in the call money market fell sharply to INR 26.13 billion from INR 68.23 billion at 1030 IST Tuesday.

At 1000 IST, the tri-party repo rate for one-day loans was at 5.03%, against 5.01% at close Tuesday. The weighted average rate was 5.01%, against 4.98% Tuesday. The volume in the broader tri-party repo market was INR 1.95 trillion, lower than INR 2.26 trillion at 1030 IST Tuesday.

Some traders expect tri-party repo rate to rise after 1400 IST as funds get locked up for a string of modest initial public offers. This will squeeze liquidity with both banks and mutual funds, dealers said. The public offers of Dhoot Transmission and Molbio Diagnostics will close Wednesday, while Milky Mist Dairy Food Ltd.'s larger offering will close Thursday.  (Aaryan Khanna)

End

US$1 = INR 95.33

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

Edited by Avishek Dutta

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