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Informist, Friday, Aug. 28, 2026

 

By Aaryan Khanna

 

NEW DELHI – The three-day interbank call money rate ended at the Reserve Bank of India's repo rate of 5.25% due to late demand for funds from banks to meet three-day cash needs ahead of the weekend, dealers said. The most-traded contract ended at the policy rate for the second straight session due to the effect of the central bank's large variable rate reverse repo auctions and initial public offerings in equity markets tying up banks' funds, they said.

 

"The market understands what the intention is behind such large VRRRs," a dealer at a state-owned bank said. "Since the weighted average call rate is still in the range, I think both lenders and borrowers are okay with keeping the RBI happy and the call rate being near the repo rate."

 

The RBI Friday conducted its largest VRRR auction since July 2022 and took all offers worth INR 1.53 trillion at the 3-day, INR 3.00 trillion tender at a cut-off rate of 5.24%. Banks fear the RBI will drain durable liquidity after the swap window for FCNR(B) deposits closes on Sept. 11, dealers said. After market hours Friday, the central bank announced a 15-day, INR 6.00 trillion VRRR auction Monday, the largest operation to drain liquidity since May 2022. 

 

The three-day call rate ended at 5.25%, the same as the open Friday and the closing level for one-day loans Thursday. The weighted average call rate was 5.22%, similar to 5.21% Thursday. The trade volume in the contract was INR 114.75 billion, down from INR 136.11 billion for one-day loans Thursday.

 

The three-day tri-party repo rate closed at 4.40%, the lowest closing level for such a contract since Feb. 6. It was sharply down from 5.10% at the open and from 5.25% at Thursday's close for one-day loans. The weighted average rate was 5.04%, down from 5.08% Thursday. The volume in the three-day contract was INR 4.71 trillion, similar to INR 4.78 trillion for one-day loans Thursday.

 

The RBI's net liquidity absorbed – a proxy for systemic liquidity surplus – was INR 3.75 trillion Thursday, similar to INR 3.76 trillion Wednesday. There were no major inflows or outflows scheduled Friday, but a sizeable chunk of liquidity came into some state-owned and private-sector banks owing to a rise in foreign currency non-resident (banks) deposits, dealers said. 

 

OUTLOOK

On Saturday, the two-day interbank call money rate is expected to open below the RBI's repo rate of 5.25% due to low demand from banks, dealers said. Most banks have met their funding needs for the weekend on Friday and trade volumes are expected to be low, as is usually the case on Saturdays.

 

The RBI will conduct a 15-day VRRR auction for INR 6.00 trillion from 0930 to 1000 IST on Monday. This is the largest VRRR auction the RBI has notified since May 2022. It is also the first time the central bank is conducting a VRRR auction for two weeks or longer since November 2024. A longer tenure drain of frictional liquidity is preferable for banks than the RBI drawing out durable liquidity, dealers said.

 

Dealers expect the two-day call rate at 4.60–5.25% Saturday. The tri-party repo rate is expected to be in the 4.50–5.20?nd. The weighted average rate in the call market is seen in the 4.90–5.20?nd, and the tri-party repo rate is likely to be 4.75-5.10%, dealers said.

 

CALL RATE

5.25%--Friday close for three-day loans

5.25%--Friday open for three-day loans

5.25%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.24	5.24
3-day	--	--
14-day	5.83	5.83
1-month	6.06	6.06
3-month	6.55	6.56

 

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India Call: Falls to SDF rate after early demand from PDs fades

 

NEW DELHI – The three-day interbank call money rate fell to the Reserve Bank of India's Standing Deposit Facility rate of 5.00?ter demand for funds from primary dealers eased, dealers said. The weighted average call rate remained near the policy repo rate of 5.25% as banks demanded higher rates to lend in the face of large daily variable rate reverse repo auctions, even though foreign currency non-resident (banks) inflows continued to add to banking system liquidity, they said.

 

At 1515 IST, the three-day call rate was 5.00%, down from 5.25% at the open and for one-day loans at close Thursday. The weighted average call rate was 5.22%, similar to 5.21% Thursday. The trade volume in the contract was INR 110.98 billion, down from INR 118.40 billion for one-day loans at 1530 IST Thursday.

 

"In the morning, the usual demand from primary dealers is there," a dealer at a state-owned bank said. "Every bank who has inflows knows there is no point lending at a lower level while the RBI is conducting VRRRs, so the opening levels have been near 5.25% over the last week."

 

The RBI Friday conducted its largest VRRR auction since July 2022 and took all offers worth INR 1.53 trillion at the 3-day, INR 3.00 trillion tender at a cut-off rate of 5.24%. Banks fear the RBI will drain durable liquidity post the closure of the swap window for FCNR(B) deposits on Sept. 11, with some funds also parked in initial public offerings and prior VRRRs, limiting the subscription, dealers said.

 

The RBI's net liquidity absorbed--a proxy for systemic liquidity surplus--was INR 3.75 trillion Thursday, similar to Wednesday. However, banks cash balances with the RBI rose sharply to INR 8.68 trillion Thursday from INR 8.34 trillion Wednesday. This signalled that banks had diverted most inflows on Thursday, either from the government month-end spending or FCNR(B) deposits, to meet regulatory requirements ahead of the reporting fortnight's end Monday, dealers said. 

 

At 1515 IST, the three-day tri-party repo rate was 4.75%, sharply down from 5.10% at the open and from 5.25% at Thursday's close for one-day loans. The weighted average rate was 5.06%, a tad lower than 5.08% Thursday. The volume on the same contract was INR 4.31 trillion, down from INR 4.45 trillion for one-day loans Thursday at 1530 IST. There were no marquee IPO subscriptions lined up Friday, which limited demand for funds from banks, dealers said.  (Aaryan Khanna)

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India Call: At repo rate; INR-3-tln VRRR to see tepid demand near month end

 

MUMBAI – The three-day interbank call money rate traded at the Reserve Bank of India's repo rate of 5.25% amid demand for funds for credit disbursement nearing the end of the month, a period which usually sees higher credit offtake, dealers said. Funds locked up in initial public offerings this week also pushed up borrowing rates. At a time when surplus liquidity remained ample, subscription at the RBI's largest variable rate reverse repo auction in over four years was tepid, at INR 1.8 trillion against a notified size of INR 3 trillion.

 

"Tomorrow's (Saturday) a working Saturday right, so people will need funds and also Monday is the last day of the month. Banks will need money for month-end," a dealer at a state-owned bank said.

 

Further, concerns of the RBI introducing measures to drain durable liquidity post the closure of the swap window for foreign currency non-resident (bank) deposits has also made banks cautious in deploying funds, dealers said. "Many dealers are not expecting liquidity (draining) measures because by September-end the surplus will reduce (amid festive season), RBI will have to conduct VRRs (not VRRRs)," a dealer at a primary dealership said. "But for now, let's see, by next week we could see some measures announced."

 

At 0950 IST, the three-day call rate was at 5.25%, the same as Thursday's close for one-day loans. The weighted average call rate was 5.25%, up from 5.21% Thursday. The trade volume on the same contract was INR 31.50 billion at 0950 IST from INR 1.25 billion at 0930 IST Thursday. At 0950 IST, the three-day tri-party repo rate was 5.12%, against 5.25% at Thursday's close for one-day loans. The weighted average rate was 5.12% up from 5.08% on Thursday. The volume on the same contract was INR 1.43 trillion at 0950 IST, up from INR 993.52 billion at 0930 IST Thursday.

End

 

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

 

Edited by Saji George Titus

 

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