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Informist, Thursday, Aug. 20, 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 after outflows for goods and services tax, dealers said. However, the outflows had minimal impact on the weighted average call rate due to the large liquidity surplus in the banking system and inflows from foreign currency non-resident (banks) deposits, which offset the drain, they said. 

 

The one-day call rate ended at 5.20% Thursday, the same as the opening level and up from 5.15% at Wednesday's close. The weighted average call rate was 5.16%, marginally up from 5.15% Wednesday. The trade volume in the contract was INR 156.77 billion, up from INR 119.92 billion Wednesday. A series of seven trades worth INR 12.75 billion after 1753 IST, all at 5.20%, increased volumes towards the end of the day.

 

The one-day tri-party repo rate ended at 5.05% Thursday, the same as the open and down from 5.10% at Wednesday's close. The weighted average rate was 5.05%, against 4.96% on Wednesday. The GST outflows saw some banks pull back from lending in the secured market, dealers said. The volume in the contract was INR 4.42 trillion, marginally down from INR 4.44 trillion Wednesday.

 

"It is natural to see some demand after the TREPS market shuts on days when there is an outflow. One bank or the other is not able to manage its position and comes to the market," a dealer at a state-owned bank said. "I don't think we will see any strain in the rates because of the GST outflows though, since banks have confidently parked funds at the VRRRs (variable rate reverse repo operations) also."

 

The RBI conducted an overnight, INR-1.00-trillion VRRR auction at 0930-1000 IST, receiving INR 1.37 trillion in offers. It accepted the notified amount at a cut-off rate of 5.24%. After the strong subscription, the central bank announced another overnight operation for INR 500 billion. The second auction at 1100-1130 IST was also oversubscribed, though the RBI accepted the notified amount at a cut-off of 5.24%. Even after the operations, the RBI impounded less than half the available liquidity with banks.

 

The net liquidity absorbed by the RBI – a proxy for liquidity surplus - fell to INR 3.71 trillion Wednesday from INR 3.91 trillion Tuesday. GST payments may have drained INR 600 billion to INR 800 billion from systemic liquidity Thursday, though FCNR(B) conversions and inflows may show a limited fall in the data, dealers said.

 

OUTLOOK

On Friday, the three-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 a three-day VRRR auction for INR 1.50 trillion at 0930-1000 IST Friday, which should be subscribed for over INR 1.00 trillion, they said. 

 

Hefty surplus liquidity may allow banks to park their funds for higher returns at the auction. At the same time, GST payment outflows may top INR 1.50 trillion by Friday, which may limit participation in the VRRR auctions despite a roll-over of funds. Two RBI VRRR auctions worth INR 1.50 trillion are scheduled to reverse Friday. Traders have also begun watching for any drain in liquidity through currency in circulation ahead of the festival season.

 

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

 

CALL RATE

5.20%--Thursday close for one-day loans

5.20%--Thursday open for one-day loans

5.15%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.19	5.19
3-day	--	--
14-day	5.83	5.80
1-month	6.06	6.06
3-month	6.54	6.53

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India Call:Below SDF rate, unaffected by GST outflow amid large cash surplus

 

NEW DELHI – The one-day interbank call money rate was below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to low demand for funds from banks, dealers said. The large liquidity surplus in the banking system prompted banks to seek higher rates of interest to park funds and both overnight variable rate reverse repo auctions conducted by the RBI Thursday were oversubscribed, despite outflows for goods and services tax payments.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--fell to INR 3.71 trillion Wednesday from INR 3.91 trillion Tuesday. GST payments had begun and may total around INR 500 billion to INR 800 billion Thursday, with a total outflow of around INR 1.80 trillion likely to reflect in banking system liquidity by Monday, dealers said. At the same time, daily inflows from foreign currency non-resident (banks) deposits had been rising in recent days and were nearly INR 200 billion a day, dealers said. The inflow under the RBI's special scheme on these deposits ends Aug. 31 and is expected to average over $10 billion per week until it shuts, which will continue to add to liquidity under Aug. 11, when the special window closes.

 

"Even after the GST outflows, the size of the pie is so large that money will be parked in the SDF (Standing Deposit Facility)," a dealer at a private sector bank said. "Even if you take out INR 1.50 trillion put in VRRRs and INR 700 billion-INR 800 billion for GST, you are still left with a clear surplus of INR 1.4 trillion. That's enough for the money market rates to remain low, especially with the daily flows coming in from FCNR(B)."

 

The RBI conducted an overnight, INR-1.00-trillion VRRR auction at 0930-1000 IST, where it got INR 1.37 trillion of offers. It accepted the notified amount at a cut-off rate of 5.24%. After the strong subscription, the central bank announced another such operation for INR 500 billion. The second auction at 1100-1130 IST was also oversubscribed, though the RBI accepted the notified amount at a cut-off of 5.24%. The RBI likely underestimated the excess liquidity with banks when announcing the first VRRR, though the hefty subscriptions may lead to a rise in the call money rate at the end of trade Thursday, dealers said.

 

At 1630 IST, the one-day call rate was at 4.85%, against 5.20% at Thursday's open and 5.15% at Wednesday's close. The weighted average call rate was 5.16%, similar to 5.15% Wednesday. The trade volume in the same contract was INR 126.78 billion, up from INR 114.37 billion at the same time Wednesday. The one-day tri-party repo rate ended at 5.05% Thursday, the same at the open and down from 5.10% at Wednesday's close. The weighted average rate was 5.05%, against 4.96% on Wednesday. The volume in the same contract was INR 4.42 trillion, similar to INR 4.44 trillion Wednesday.  (Aaryan Khanna)

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India Call: Below repo; VRRR subscription seen dn this wk amid GST payments

 

MUMBAI – The one-day interbank call money rate traded below the Reserve Bank of India's repo rate of 5.25% Thursday owing to surplus liquidity in the banking system--about 1.4% of net demand and time liabilities--dealers said. Some traders expect the RBI's overnight variable rate reverse repo operation of INR 1 trillion to be fully subscribed, given the redemption of INR 1.26 trillion from Wednesday's overnight operation. Most traders, however, do not expect full subscription due to the onset of outflows for goods and services tax, they said. 

 

"We're expecting forty to fifty thousand (INR 400 billion to INR 500 billion) to go today (Thursday for GST), but it's tough to say how much will go over the next few days, so people will be cautious (in participating in the VRRR)," a dealer at a state-owned bank said. An Informist Poll of eight participants estimated subscription at INR 800 billion. Outflows of about INR 1.8 trillion are expected for payment of goods and services tax starting Thursday for the rest of this week. "Yesterday's (Wednesday's) maturity was also more than one lakh (INR 1 trillion)...", a dealer at a private sector bank said. "Even with GST we have ample liquidity. So today's (VRRR) will be subscribed, but beyond this I think VRRRs will slow down a little bit because of end-of-month credit demand and GST."

 

At 0945 IST, the one-day call rate was at 5.20%, against 5.15% at Wednesday's close. The weighted average call rate was 5.20%, up from 5.15% Wednesday, but is likely to ease to the same rate as Wednesday by the end of the session. The trade volume on the same contract was INR 19.00 billion from INR 500 million at 0930 IST Wednesday. At 0945 IST, the one-day tri-party repo rate was 5.00%, against 5.10% at Wednesday's close. The weighted average rate was 5.03% against 4.96% on Wednesday. The volume on the same contract was INR 1.93 trillion, against INR 1.32 trillion at 0930 IST Wednesday.

 

The net liquidity absorbed by the RBI--a proxy for liquidity surplus--fell to INR 3.71 trillion Wednesday from INR 3.91 trillion Tuesday. Dealers expect the weighted average rate of the tri-party repo market around 5.00%.  End

 

US$1 = INR 95.71

 

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

 

Edited by Saji George Titus

 

 

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