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Informist, Friday, Aug. 14, 2026

By Cassandra Carvalho

MUMBAI – The three-day interbank call money rate ended at the Reserve Bank of India's repo rate of 5.25% Friday and much higher than Thursday's close for one-day loans, on demand for funds for fortnight-end reporting requirements and to provide for funding obligations over the weekend, dealers said. Further, some banks' funds were parked in initial public offerings, dealers said. 

"Rates have cooled off significantly from earlier, but there is a slight upward pressure because we have the Shiprocket and Behari Lal IPOs which have seen large subscriptions," a trader at a primary dealership said. The portion reserved for non-institutional investors in the IPO of Behari Lal Engineering Ltd. was subscribed over 11 times on its second day Thursday. 

The RBI requires banks to maintain an average daily cash reserve requirement of INR 8.03 trillion for the fortnight ending Saturday, but as of Thursday, banks have maintained cash balances of INR 7.90 trillion. To add to the demand for funds is the holiday weekend, with demand for funds likely to be higher since Saturday is a holiday for Independence Day. The RBI's variable rate reverse repo auction of INR 1.50 trillion Friday saw a subscription of 54%, reflecting lesser appetite to park funds, compared to overnight VRRR earlier this week which saw over 70% subscription. 

The three-day call money rate ended at 5.25% Friday, up from 4.99% for one-day loans Thursday. The weighted average call rate was 5.23%, inching higher from 5.21% the previous session. The volume in the market was INR 145.99 billion, much lower than INR 208.17 billion in the previous session. The three-day tri-party repo rate ended at 5.15%, against 4.95% for one-day loans Thursday. The weighted average rate was 5.06%, higher than 5.09% Thursday. The volume in the TREPS market was INR 4.06 trillion, higher than INR 3.93 trillion the previous session.

OUTLOOK

The call money market is shut Saturday for Independence Day. On Monday, the one-day interbank call money rate is seen above the RBI's repo rate of 5.25% after the RBI post-market hours said it will cease the concessional swap facility for foreign currency non-resident (banks) deposits for such deposits raised post Aug. 31. Traders had expected foreign inflows topping $100 billion, with FCNR(B) deposits leading these inflows, and thus had expected ample durable liquidity in the banking system. Traders had expected core systemic liquidity surplus to hit INR 9 trillion on the back of robust inflows from FCNR(B) deposits. These bets will be pared, and several banks had plans in place to raise such deposits through leveraging products in September. On expectations of lower systemic liquidity, borrowing rates are likely to rise, dealers said. 

The RBI will conduct a seven-day VRRR auction for INR 2 trillion Monday, which is likely to see moderate subscription since several traders do not prefer locking in funds for such a long duration. Traders have begun watching out for any drain in liquidity through currency in circulation, nearing the festive season. 

Liquidity is seen to be ample 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 4.60–5.50% on Monday. The one-day tri-party repo rate is expected to be in the 4.60–5.50% band. The weighted average call rate is expected to be in the 5.15–5.35% band and the tri-party repo rate is likely to be 5.05-5.30%, dealers said.

CALL RATE

5.25%--Friday close for three-day loans

5.30%--Friday open for three-day loans

4.99%--Thursday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF rate; more overnight VRRRs seen next week

MUMBAI – The three-day interbank call money rate was below the Reserve Bank of India's Standing Deposit Rate of 5.00% as demand for funds eased after meeting the borrowing requirements, dealers said. The tri-party repo rate for three-day loans ended above the RBI's SDF rate due to last-minute funding requirements, dealers said.

Dealers said some banks which did not maintain cash balances at the beginning of the fortnight had borrowed to meet the cash balance requirement for the next two days. This, along with regular borrowing by primary dealerships and funds locked up for initial public offerings, has kept the weighted average call rate near the central bank's policy rate of 5.25% on Friday.

At 1625 IST, the three-day call rate was 4.85%, down from 4.99% at Thursday's close for one-day loans. The weighted average call rate was 5.24%, up from 5.21% Thursday. The trade volume in the same contract was INR 128.79 billion, down from INR 167.41 billion at 1630 IST Thursday.

However, the weighted average rate in the tri-party repo market was sharply lower at 5.06% on Friday, down from 5.09% Thursday. The tri-party repo rate for three-day loans ended at 5.15%, against 4.95% at Thursday's close for one-day loans. The volume in the market was INR 4.06 trillion, against INR 3.93 trillion Thursday.

The three-day tri-party repo rate was above the RBI's SDF rate in the first half but later fell below the lower end of the Liquidity Adjustment Facility corridor due to lower-than-expected subscription at the three-day, INR-1.50-trillion variable rate reverse repo auction on Friday and ample liquidity surplus, dealers said. Only the last few trades were at around 5.15%, which was due to last-minute demand, they said.   

The RBI accepted all INR 802.35 billion offered at the VRRR auction, with a cut-off of 5.24%. According to an Informist Poll, the subscription was seen at INR 875 billion. 

Dealers said that even though funds were locked for IPOs, there was little impact on overnight rates due to an ample liquidity surplus and the relatively small size of the IPOs. With the liquidity surplus in the banking system at an almost three-month high, dealers expect the RBI to continue conducting more overnight VRRR auctions next week before the goods and services tax outflows begin.     

"No major outflows are seen next week until GST outflows, so they may bring another overnight VRRR Monday," a dealer at a private sector bank said. Dealers expect the size of the auction Monday to be INR 1 trillion to INR 1.5 trillion. On Monday, VRRR tenders worth INR 1.76 trillion will mature. 

The RBI has conducted four overnight VRRR auctions this week and three of these auctions saw more than 50% subscription. Friday's three-day VRRR auction was also seen as an overnight auction as the money market is shut on Saturday for Independence Day. Friday's auction saw a 53% subscription. So most dealers expect the central bank to conduct an overnight VRRR auction Monday due to higher participation in such shorter-term auctions.  (J. Navya Sruthi)

India Call: At RBI's repo rate on fortnight-end needs, 3-day VRRR auction

MUMBAI – The three-day interbank call money rate was at the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks to meet reporting fortnight-end requirements, dealers said. The overnight rate for three-day loans opened at 5.30%, the highest opening level seen in the current fortnight to Saturday. The tri-party repo rate for three-day loans was above the RBI's Standing Deposit Facility rate of 5% even though liquidity remained at the highest level since Apr. 20 due to the RBI's three-day, INR-1.50-trillion variable rate reverse repo auction between 0930 IST and 1000 IST, they said. 

"Banks are seen borrowing because of two holidays, and they will need funds over the weekend... tomorrow (Saturday) is also fortnight-end. Banks should maintain their cash balances too," a dealer at a private sector bank said. The money market will be shut on Saturday on account of Independence Day.   

At 0951 IST, the three-day call rate was at 5.25%, sharply up from 4.99% at Thursday's close for one-day loans. The weighted average call rate was 5.30%, up from 5.21% Thursday. The trade volume in the same contract was INR 38.34 billion from INR 3.80 billion at 0930 IST Thursday.

At 0952 IST, the tri-party repo rate for three-day loans was at 5.12%, against 4.95% at Thursday's close for one-day loans. The weighted average rate was 5.13%, against 5.09% Thursday. The volume in the same contract was INR 1.61 trillion, against INR 910.48 billion at 0930 IST Thursday.

The RBI's three-day variable rate reverse repo auction for INR 1.50 trillion also pushed rates higher Friday, dealers said. According to an Informist Poll of 11 dealers, total offers at the auction are likely to be between INR 600 billion and INR 1.30 trillion, with a median estimate of INR 875 billion. All cut-off estimates were at the highest level of 5.24%.

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--rose to INR 3.54 trillion Thursday from INR 3.43 trillion Wednesday. The RBI is conducting a large VRRR auction as prior tenders worth INR 1.23 trillion will mature Friday, dealers said. 

Liquidity surplus inched up slightly as banks converted their dollar-denominated inflows from foreign currency non-resident (banks) deposits into rupee liquidity, which helped the liquidity surplus, dealers said. Although there have been robust flows of dollar deposits, the RBI's regular dollar sales in the spot market limited the rise in the systemic surplus, they said.

Dealers expect the weighted average call rate to be around 5.25 by the end of Friday. They see the weighted average rate of the tri-party repo market around 5.10%.  (J. Navya Sruthi)

End

US$1 = INR 95.4250

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

Edited by Deepshikha Bhardwaj

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