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Informist, Monday, Aug. 17, 2026

 

By Aaryan Khanna

 

NEW DELHI – The one-day interbank call money rate ended near the Reserve Bank of India's repo rate of 5.25% due to late demand for funds from banks, dealers said. Liquidity conditions remained comfortable through the day despite the central bank's two variable rate reverse repo auctions. Surplus liquidity in the banking system neared INR 4 trillion on the back of foreign currency non-resident (banks) deposits, they said. 

 

"There was no pressure on money market rates. Liquidity is growing due to FCNR flows, which have been good for domestic banks," a dealer at a state-owned bank said. "Some banks didn't participate in the term VRRR because it was for seven days, but since the (FCNR[B]) scheme is ending in August, there should be a good amount of inflows still to come."

 

The RBI's swap facility for FCNR(B) deposits will now be available only for deposits mobilised until Aug. 31, compared with the earlier deadline of Sept. 30, the central bank said in a press release Friday. Traders had expected foreign inflows to top $100 billion, with FCNR(B) deposits leading these inflows, and thus had expected ample durable liquidity in the banking system.

 

The one-day call rate ended at 5.20%, down from 5.25% at open Monday and at Friday's close for three-day loans. The weighted average call rate was 5.18%, down from 5.23% Friday. The trading volume in the contract was INR 131.27 billion, marginally down from INR 134.98 billion Friday.

 

The tri-party repo rate for one-day loans ended at 4.90% Monday, down from 5.05% at the open and 5.15% at Friday's close for three-day loans. The weighted average rate in the tri-party repo market eased to 5.02% from 5.06% Friday. The volume in the most-traded contract was INR 4.29 trillion, up from INR 4.05 trillion Friday.

 

The net liquidity absorbed by the RBI – a proxy for liquidity surplus — fell to INR 3.64 trillion Sunday from INR 3.96 trillion Saturday and INR 3.98 trillion Friday. The sharp fall came at the beginning of the reporting fortnight Sunday, with cash balances parked with the RBI rising to INR 8.12 trillion from INR 7.80 trillion the previous day. "Most banks will meet product requirements equally through the week, rather than frontloading it," the dealer quoted above said.
 

"Previously, the FCNR window was open till September. Most of the banks were expecting inflows for one and a half months. Now it is getting closed by the end of this month, so now all banks will have to rethink their investment strategy," a dealer at another state-owned bank said. "Previously, banks which had excess funds would've waited for better rates for investment, but now it is such that whatever options they have, they might have to just get on with it."

 

Meanwhile, the RBI accepted all offers worth INR 989.45 billion at its seven-day, INR-2.00-trillion VRRR auction at 0930-1000 IST. Market participants were wary of parking funds for the entire week as goods and services tax outflows are expected to start by Friday, dealers said. At the second VRRR auction, which was an overnight operation for INR 1.00 trillion, market participants parked INR 969.14 billion.

 

OUTLOOK

On Tuesday, the one-day interbank call money rate is expected to open near the RBI's repo rate of 5.25% due to early demand for funds from primary dealers. The RBI will conduct an overnight VRRR auction for INR 1.50 trillion at 0930-1000 IST Tuesday, which should be subscribed well as traders roll over their subscriptions, dealers said. Traders have begun watching for any drain in liquidity through currency in circulation, ahead of the festive season. 

 

Liquidity is seen as ample, at least until outflows for goods and services tax begin at the end of the week, dealers said. Dealers expect the one-day call rate at 4.60–5.30% on Tuesday. The one-day tri-party repo rate is expected to be in the 4.60–5.50?nd. The weighted average call rate is expected to be in the 5.15–5.25?nd, and the tri-party repo rate is likely to be 5.05-5.30%, dealers said.

 

CALL RATE

5.20%--Monday close for one-day loans

5.25%--Monday open for one-day loans

5.25%--Friday close for three-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.24	5.28
3-day	--	--
14-day	5.82	5.82
1-month	6.06	6.07
3-month	6.55	6.56

 

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India Call: Falls below SDF rate despite two VRRR auctions by RBI

 

NEW DELHI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00?spite the central bank conducting two variable rate reverse repo auctions to drain surplus liquidity, dealers said. Traders were cautious in parking funds at the auctions, fearing a potential rise in money market rates, even with the large liquidity surplus, they said. 

 

"Banks did not tender the entire amount. Some part was kept back to ensure cash position was comfortable," a dealer at a private-sector bank said. "One reason was that the TREPS (tri-party) rate was not extremely low in the first place, and then there could be some IPO-related mismatches among banks today (Monday)," the dealer said, referring to funds locked up in subscriptions of initial public offerings last week. 

 

The RBI accepted all offers worth INR 989.45 billion at its seven-day, INR-2.00-trillion VRRR auction at 0930-1000 IST. Market participants were wary of parking funds for the entire week as goods and services tax outflows are expected to start by Friday, dealers said. Moreover, they wanted to keep excess cash balances at the beginning of the reporting fortnight before the liquidity drain makes cash management more difficult, dealers said.  At the second VRRR auction, which was an overnight operation for INR 1.00 trillion, market participants parked INR 969.14 billion.

 

The nearly INR-2.00-trillion drain from money markets was barely felt as the RBI's net liquidity absorbed – a proxy for the systemic liquidity surplus – rose to INR 3.96 trillion on Sunday, the highest since April. With the central bank announcing that its flagship foreign currency non-resident (banks) deposits concessional swap window would shut earlier than scheduled, dealers said they were reassessing the quantum of liquidity coming into the banking system for the rest of August. The liquidity surplus is likely to rise quicker than expected as the deadline has been moved forward to Aug. 31 from Sept. 30.

 

At 1700 IST, the one-day call rate was 4.85%, down from 5.25% at open and at Friday's close for three-day loans. The weighted average call rate was 5.19%, down from 5.23% Friday. The trade volume in the contract was INR 126.22 billion, similar to INR 128.87 billion at 1630 IST Friday.

 

The tri-party repo rate for one-day loans ended at 4.90% Monday, down from 5.05% at the open and 5.15% at Friday's close for three-day loans. The weighted average rate in the tri-party repo market eased to 5.02% from 5.06% Friday. The volume in the most-traded contract was INR 4.29 trillion, up from INR 4.05 trillion Friday.  (Aaryan Khanna)

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India Call: At repo rate even as liquidity surplus at 4-month high

 

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's repo rate of 5.25% amid demand for funds from primary dealerships and as the central bank conducted a seven-day variable rate reverse repo auction of INR 2 trillion, the largest notified size at such an operation in a week. However, surplus liquidity rose to its highest in four months, likely on the back of inflows through foreign currency non-resident (bank) deposits, dealers said. 

 

Subscription at the seven-day operation was moderate at about 50%, the same as expected in an Informist Poll median of seven market participants. Several traders expect the RBI to conduct another VRRR for an overnight tenure later in the day, since dealers likely refrained from aggressively tendering funds at the seven-day VRRR due to its tenure overlapping with outflows for goods and services tax, dealers said. 

 

"I think RBI will have to bring an overnight VRRR, because no one is going to participate in this long-tenure (seven-day) one," a dealer at a state-owned bank said, who expected a subscription of INR 400 billion at the seven-day VRRR. 

 

At 1021 IST, the one-day call rate was at 5.22%, inching lower from 5.25% at open and at Friday's close for three-day loans. The weighted average call rate was 5.25%, up from 5.23% Friday. The trade volume in the same contract was INR 31.87 billion from INR 64.95 billion at 1030 IST Friday.

 

At 1021 IST, the one-day tri-party repo rate was at 5.05%, against 5.15% at Friday's close for three-day loans. The weighted average rate was 5.05%, against 5.06% Friday. The volume in the same contract was INR 1.59 trillion, against INR 2.04 trillion at 1030 IST Friday.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--rose to INR 3.98 trillion Friday from INR 3.54 trillion Thursday. Funds parked by banks under the RBI's Standing Deposit Facility rose to INR 2.34 trillion Friday, the highest since Aug. 7.

 

Dealers expect the weighted average call rate to be around 5.20% by the end of Monday. They see the weighted average rate of the tri-party repo market around 5.10%.  End

 

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

 

Edited by Saji George Titus

 

 

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