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Informist, Wednesday, Aug. 19, 2026

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate ended below the Reserve Bank of India's repo rate of 5.25% due to a comfortable liquidity surplus in the banking system, dealers said. Banks may have added to cash balances with the RBI Wednesday, ahead of the scheduled outflow for goods and services tax in the remainder of the week, with an increased demand for funds from banks after the tri-party repo market closed at 1600 IST, they said. 

The one-day call rate ended at 5.15% Wednesday, down from 5.20% at the open but up from Tuesday's close of 4.90%. The weighted average call rate was 5.15%, up from 5.11% Tuesday. The trade volume in the contract was INR 119.91 billion, up from INR 113.29 billion Tuesday.

The tri-party repo rate for one-day loans ended at 5.10%, up from 5.03% at the open and 4.60% at close Tuesday. The weighted average rate in the tri-party repo market was 4.96% compared with 4.97% Tuesday. The volume in the most-traded contract was INR 4.44 trillion, slightly lower than INR 4.58 trillion in the previous session.

The RBI's overnight, INR-1.50-trillion variable rate got offers worth INR 1.26 trillion, all of which the central bank accepted at a cut-off rate of 5.24%. Banks largely chose to roll over the two maturing overnight VRRRs auctions conducted Tuesday, which had brought back INR 1.19 trillion in to the banking system on their reversal, dealers said. 

"It looks like the RBI is thinking of moving overnight rates up, maybe through different measures," a dealer at a private-sector bank said. "So far, the VRRRs seem to be only moderately effective. Let's see if he tries a new strategy after the GST outflows."

GST payments will likely drain around INR 1.8 trillion from banking system liquidity by Monday, dealers said. Some of this drain will be offset by the inflows that banks are receiving under foreign currency non-resident (banks) deposits. Some traders expect the RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – to rise to INR 5.00 trillion by the end of the month. The surplus rose to INR 3.91 trillion Tuesday from INR 3.63 trillion Monday, according to latest data, largely due to the impact of the inflows, dealers said. 

OUTLOOK

On Thursday, 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 1.00 trillion at 0930-1000 IST Thursday, which should be subscribed for around INR 600 billion as banks hold onto cash to meet goods and services tax outflows, dealers said.

A low subscription may elicit a second VRRR on Thursday, though it would be a smaller amount as the central bank would not want to push up overnight rates above the repo rate amid the outflows, dealers said. Traders have also begun watching for any drain in liquidity through currency in circulation ahead of the festival season.

Dealers expect the one-day call rate at 4.60–5.30% on Thursday. The one-day tri-party repo rate is expected to be in the 4.50–5.25% 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 4.90-5.20%, dealers said.

CALL RATE

5.15%--Wednesday close for one-day loans

5.20%--Wednesday open for one-day loans

4.90%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below repo; surplus rises further on FCNR(B) inflows

MUMBAI – The one-day interbank call money rate traded below the Reserve Bank of India's repo rate Wednesday amid low demand for funds and as systemic liquidity increased further due to inflows from foreign currency non-resident (bank) deposits, dealers said. Albeit, traders had expected that the RBI's overnight variable rate reverse repo operation was unlikely to be fully subscribed, dealers said. The RBI took all offers worth INR 1.26 trillion at its overnight VRRR for INR 1.50 trillion. Some banks have kept aside cash for several initial public offerings this week. These IPOs are not of large size, but the number of IPOs is keeping the demand for funds steady, dealers said. 

Both the one-day call and tri-party repo rates ended below the RBI's Standing Deposit Facility of 5.00% Tuesday and the weighted average rates were near the SDF rate even after the central bank conducted two VRRRs earlier in the day. With rates falling so low, the RBI is seen aggressively conducting VRRRs and may conduct a second operation Wednesday, dealers said. "Looks like RBI is doing trial and error, he's seeing which time, which tenure will see more participation," a dealer at a state-owned bank said. The RBI Tuesday conducted its second overnight VRRR much later than usual, at 1200 IST. The central bank likely opted for the time since by then, early demand from primary dealerships and banks had subsided, dealers said. 

Systemic liquidity likely rose on the back of robust inflows through foreign currency non-resident (banks) deposits, dealers said, keeping alive expectations that flows by the end of this month could top $75 billion. However, even if the RBI conducts several VRRRs, rates in overnight markets may still be low with such an ample surplus since banks have parked funds in mutual funds, and these entities with surplus cash do not have access to VRRRs, dealers said. 

At 1025 IST, the one-day call rate was at 5.20%, against 4.90% at Tuesday's close. The weighted average call rate was 5.20%, up from 5.11% Tuesday. The trade volume on the same contract was INR 32.46 billion from INR 40.08 billion at 1030 IST Tuesday. At 1025 IST, the one-day tri-party repo rate was 5.00%, against 4.60% at Tuesday's close. The weighted average rate was 5.01%, inching higher from 4.97% Tuesday. The volume on the same contract was INR 2.25 trillion, against INR 2.21 trillion at 1030 IST Tuesday.

The net liquidity absorbed by the RBI--a proxy for liquidity surplus—rose to INR 3.91 trillion Tuesday from INR 3.63 trillion Monday. Dealers expect the weighted average call rate to be around 5.15% by the end of the day. They see the weighted average rate of the tri-party repo market around 5.00%.  End

US$1 = INR 95.75

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

Edited by Deepshikha Bhardwaj

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