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Informist, Tuesday, Sept. 1, 2026

 

By Aaryan Khanna

 

NEW DELHI – The one-day interbank call money rate ended below the Standing Deposit Facility rate of 5.00% for the second day as the systemic liquidity surplus rose sharply to an over-four-year high, 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%, down from 5.25% at the open but the same as Monday's close for one-day loans. The weighted average call rate was 5.16%, slightly lower than 5.18% Monday. The trade volume in the contract was INR 117.61 billion, down from INR 129.84 billion Monday.

 

The one-day tri-party repo rate ended at 4.50%, from 5.00% at the open and 4.75% at Monday's close for one-day loans. The weighted average rate was 4.82%, lower than 4.96% Monday. The volume on the same contract was INR 4.79 trillion, against INR 4.73 trillion for one-day loans Monday.

 

Surplus liquidity rose further Monday as the RBI's deadline to mobilise deposits under its concessional swap window for foreign currency non-resident (banks) deposits came to an end. Inflows through FCNR(B) deposits have likely topped expectations, with estimates of deposits raised under the scheme ranging between $85 billion and $100 billion or more, according to bankers.

 

The net liquidity absorbed by the RBI, a proxy for the liquidity surplus, hit INR 6.65 trillion Monday, the highest since Apr. 19, 2022. The jump of over INR 1.6 trillion in the liquidity surplus was the largest single-day rise in nearly five months. Traders expect daily variable rate reverse repo auctions to continue as the RBI looks to maintain the weighted average call rate near the repo rate, dealers said.

 

"I think now it (liquidity) will start to have an effect on the rates. The market can't ignore nearly INR 7 trillion of liquidity, but the RBI is trying to keep rates high through these massive VRRRs," a dealer at a state-owned bank said. "The borrowing costs should fall now that banks have a solid idea how much flows they have received under FCNR."

 

Banks parked INR 1.14 trillion at the seven-day, INR-6.00-trillion VRRR auction at 0930-1000 IST. The RBI also accepted all bids of INR 2.60 trillion at the overnight, INR-4.00-trillion VRRR auction later in the day. The cut-off rate at both auctions was 5.24%.

 

OUTLOOK

Wednesday, 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 an overnight VRRR auction for INR 5.00 trillion at 0930-1000 IST Wednesday. This is after a 15-day auction Monday and a seven-day tender Tuesday were poorly subscribed and followed by overnight VRRRs.

 

Dealers expect the one-day call rate at 4.60–5.25% Wednesday. 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%--Tuesday close for one-day loans

5.25%--Tuesday open for one-day loans

4.75%--Monday close for one-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.23	5.24
3-day	--	--
14-day	5.81	5.83
1-month	6.04	6.05
3-month	6.56	6.56

 

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India Call: Below SDF rate; VRRRs to continue this week

 

MUMBAI – The one-day interbank call money rate fell below the Reserve Bank of India's Standing Deposit Facility rate of 5.00?ter poor participation at the two variable rate reverse repo auctions the central bank conducted Tuesday, amid ample surplus liquidity. Surplus liquidity Monday rose to 2.47% of the net demand and time liabilities as per the latest data on bank deposits as of Aug. 15.

 

Systemic liquidity could top INR 7 trillion this week because of inflows from banks swapping dollars received from foreign currency non-resident (banks) deposits, dealers said. To drain frictional liquidity, the RBI is likely to continue conducting VRRR operations, they said, while it could introduce permanent measures to drain liquidity later in the month after major tax outflows. Traders have differing views on when permanent measures to drain liquidity will be introduced, with some expecting it anytime this month and others expecting measures in October.  

 

"Commentary on liquidity at the October policy (meeting of the RBI's Monetary Policy Committee) is expected, but for now RBI will continue with VRRRs, that mix and match of tenures and size will continue," a dealer at a primary dealership said. Inflows through FCNR(B) deposits have likely topped expectations, with estimates of deposits raised under the scheme ranging between $85 billion and $100 billion or more, according to bankers. Systemic liquidity is likely to rise until the window to swap FCNR(B) deposits shuts Sept. 11, some dealers said. In spite of this, participation at VRRRs remains poor. 

 

"Banks are not aware of what flows they'll have later in the day, in the evening, which is why so much money is going into SDF at the end of the day instead of VRRRs," a dealer at a state-owned bank said. "Disbursements are there, and nowadays it's these IPOs (initial public offerings) which is what banks need money for." Some traders said the poor participation at VRRRs would push the RBI to introduce measures to drain durable liquidity so that the weighted average call rate is maintained near the repo rate. Permanent liquidity-draining measures include incremental hikes in the cash reserve ratio or a Market Stabilisation Scheme, dealers said.

 

At 1630 IST, the one-day call rate was 4.75%, down from 5.25% at open but the same as Monday's close for one-day loans. The weighted average call rate was 5.19%, similar to 5.18% Monday. The trade volume in the contract was INR 108.51 billion, from INR 110.75 billion for one-day loans at 1630 IST Monday. The one-day tri-party repo rate ended at 4.50%, from 5.00% at the open and 4.75% at Monday's close for one-day loans. The weighted average rate was 4.82%, lower than 4.96% Monday. The volume on the same contract was INR 4.79 trillion, from INR 4.73 trillion for one-day loans Monday.  (Cassandra Carvalho)

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India Call: At repo rate; liquidity jumps further on month-end govt spending

 

MUMBAI – The one-day interbank call-money rate Tuesday was at the Reserve Bank of India's repo rate of 5.25% on early demand for funds from primary dealerships, with some banks parking funds in initial public offerings, dealers said. The surplus systemic liquidity in the banking system rose further Monday due to the Centre's expenditure for salaries and pensions, dealers said. Amid demand for credit disbursements and funds parked in initial public offerings, traders refrained from aggressive tendering at the RBI's seven-day, INR-6-trillion variable rate reverse repo operation, with expectations of the RBI conducting a short-tenure operation after the result of the seven-day, dealers said. Traders expect the RBI to conduct an overnight VRRR of INR 2 trillion to INR 4 trillion after the seven-day operation, a pattern the RBI has opted for in the recent past, they said. "I think tendering (at the seven-day operation) will be around two to three lakh crore (INR 2 trillion-INR 3 trillion), because banks also have credit disbursements planned so they will not want to park money for seven days," a dealer at a private sector bank said. 

Surplus liquidity rose further Monday to its highest since Apr. 19, 2022. The net liquidity absorbed by the RBI -- a proxy for liquidity surplus -- hit INR 6.65 trillion Monday, from INR 5.04 trillion Sunday. At 1000 IST, the one-day call rate was at 5.25% against 4.75% at Monday's close. The weighted average call rate was 5.25%, up from 5.18% Monday. The trade volume on the same contract was INR 28.28 billion at 1000 IST from INR 500 million at 1000 IST Monday. At 1000 IST, the one-day tri-party repo rate was 4.93%, against 4.75% at Monday's close. The weighted average rate was 4.96%, the same as Monday. The volume on the same contract was INR 1.08 trillion at 1000 IST, from INR 857.01 billion at 0930 IST Monday.  (Cassandra Carvalho)

 

End

 

US$1 = INR 94.9500

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

 

Edited by Rajeev Pai

 

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