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Informist, Monday, Aug. 31, 2026

 

By Aaryan Khanna

 

NEW DELHI – The one-day interbank call money rate ended sharply below the Standing Deposit Facility rate of 5.00% as the surplus liquidity in the banking system topped INR 5 trillion, hitting its highest since mid-April, dealers said. Banks had a comfortable cash pile even after two large variable rate reverse repo auctions by the Reserve Bank of India, both of which were undersubscribed.

 

The one-day call rate ended at 4.75% Monday, lower than 5.25% at open but unchanged from 4.75% at Saturday's close for two-day loans. The weighted average call rate was 5.18%, up from 4.95% Saturday but slightly lower than 5.22% Friday. Trade volume in the contract was INR 129.90 billion, up from INR 15.90 billion Saturday and INR 114.75 billion Friday.

 

The one-day tri-party repo rate was 4.75%, against 4.65% at Saturday's close for two-day loans. The weighted average rate was 4.96%, up from 4.72% on Saturday but down from 5.04% Friday. Volume in the one-day contract was INR 4.73 trillion, surging from INR 93.24 billion in the most-traded contract Saturday. The three-day contract Friday had volumes of INR 4.71 trillion.

 

"I don't think any bank is worried about (a shortage of) liquidity right now," a dealer at a private-sector bank said. "In fact, it is the opposite situation – when you have such a large chunk of liquidity on hand, it becomes a pain to deploy effectively."

 

The net liquidity absorbed by the RBI — a proxy for liquidity surplus — touched INR 5.04 trillion Sunday, the highest since Apr. 15. It has risen gradually from INR 5.01 trillion Saturday and INR 4.88 trillion. However, the over INR-1-trillion jump in systemic liquidity between Thursday and Friday was the biggest single-day jump since the end of June and was caused by some government spending at the month-end and a large chunk of foreign currency non-resident (banks) deposits being swapped with the RBI under its concessional facility, dealers said.

 

The central bank is expected to continue conducting overnight or short-tenure VRRRs to drain frictional liquidity this week, dealers said. The RBI likely conducted large VRRRs Monday due to the redemption of two VRRRs totalling INR 2.45 trillion, along with the increase in surplus liquidity, dealers said.

 

At the 0930-1000 IST tender, the central bank accepted all INR-1.35-trillion offers at its 15-day, INR-6.00-trillion tender, its most significant frictional liquidity drain since 2022. After the two-week auction was undersubscribed, the RBI conducted an overnight, INR-4.00-trillion VRRR auction at 1100-1130 IST, which saw offers worth INR 2.50 trillion. The central bank accepted all offers at the second auction as well. Both auctions had a cut-off rate of 5.24%. 

 

After the rise in liquidity Friday, banks reduced their cash balances with the RBI over the weekend after aligning the average daily cash balances with regulatory norms, dealers said. In the reporting fortnight to Sunday, banks have maintained an average cash balance of INR 8.18 trillion with the RBI, against the requirement of INR 8.17 trillion. Banks would have slightly raised their cash balances with the RBI Monday at the end of the reporting fortnight, dealers said. 

 

OUTLOOK

On Tuesday, the one-day call rate is expected to open near the RBI's repo rate of 5.25% due to early demand for funds from primary dealers, with banks having the option to deploy the cash at VRRR, dealers said. FCNR(B) inflows and government spending are likely to have further increased systemic liquidity, they said. 

 

The RBI will conduct a seven-day VRRR auction for INR 6.00 trillion at 0930-1000 IST Tuesday. This matches the huge 15-day VRRR tender the central bank conducted Monday, the largest since 2022. With no significant outflows lined up in the next week and liquidity surplus rising, the auction may see around INR 2.5 trillion of subscription, dealers said.

 

Dealers expect the one-day call rate at 4.60–5.25% Monday. 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

4.75%--Monday close for one-day loans

5.25%--Monday open for one-day loans

4.75%--Saturday close for two-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	FRIDAY
Overnight	5.24	5.24
3-day	--	--
14-day	5.83	5.83
1-month	6.05	6.06
3-month	6.56	6.55

 

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India Call: Below repo; liquidity at Apr high on govt spend, FCNR(B) inflow

 

MUMBAI – The one-day interbank call money rate traded below the Reserve Bank of India's repo rate of 5.25% as the surplus liquidity on Friday hit its highest since Apr. 15, on the back of inflows through foreign currency non-resident (banks) deposits and the Centre's month-end expenditure for salaries and pensions, dealers said. The call money market opened at about 1000 IST, and the rate traded at the RBI's repo rate on early demand for funds, amid the RBI's 15-day variable rate reverse repo auction for INR 6 trillion. However, as traders had expected, due to the long tenure of the VRRR, the operation was poorly subscribed. The RBI took all offers worth INR 1.35 trillion at the auction. This was the largest auction in terms of notified size since May 2022, while the 15-day tenure was the first since November 2024. 

 

"September 14-15th we will see around two to three lakh crore (INR 2 trillion to INR 3 trillion) outflow for advance tax payments," a dealer at a state-owned bank said. "And now the FCNR(B) flows will also stop, so it was expected that 15-day won't see subscription." The 15-day operation reverses Sept. 15, while Monday is the last day under the RBI's swap window to mobilise FCNR(B) deposits. Traders had expected that the RBI would follow with an overnight or shorter-tenure VRRR after the 15-day operation. Shortly after the 15-day VRRR result was published, the RBI said it would conduct an overnight VRRR for INR 4 trillion. Subscription at the overnight VRRR was 63%, slightly higher than estimated, as state-owned banks were seen parking excess funds, dealers said. Albeit, the overnight VRRR did not see full subscription despite its preferred tenure due to month-end funding requirements such as credit disbursement, dealers said. Banks also refrained from parking cash at VRRRs Monday to maintain reporting fortnight-end cash balances, some dealers said.

 

The net liquidity absorbed by the RBI — a proxy for liquidity surplus — hit INR 4.88 trillion Friday — the highest since Apr. 15, from INR 3.75 trillion Thursday. Surplus liquidity marked the biggest single-day jump since the end of June, as more than INR 400 billion of inflows came from the Centre's month-end expenditure and banks brought in hefty flows through FCNR(B) deposits nearing the closure of the swap window to raise these deposits Monday, dealers said. "These few days RBI has allowed us to swap the FCNR(B) deposits on multiple days so we will still be seeing inflows this week," a dealer at another state-owned bank said. The central bank has allowed banks to access its special window for swapping dollars raised through these deposits daily, rather than once a week. The central bank is expected to continue conducting overnight or short-tenure VRRRs to drain frictional liquidity this week, dealers said. The RBI likely conducted VRRRs of large size Monday due to the redemption of two VRRRs Monday totalling INR 2.45 trillion along with the increase in surplus liquidity, dealers said.   

 

At 1150 IST, the one-day call rate was at 5.15% against 4.75% at Saturday's close for two-day loans. The weighted average call rate was 5.23%, up from 4.95% Saturday. The trade volume on the same contract was INR 76.57 billion from INR 190 million at 1130 IST Saturday. At 1150 IST, the one-day tri-party repo rate was 5.05%, against 4.65% at Saturday's close for two-day loans. The weighted average rate was 5.03% up from 4.72% on Saturday. The volume on the same contract was INR 2.92 trillion at 1150 IST, surging from INR 29.04 billion at 1130 IST Saturday.  (Cassandra Carvalho)

 

End

 

US$1 = INR 95.16

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

 

With inputs from Aaryan Khanna

Edited by Saji George Titus

 

 

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