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Informist, Tuesday, Sept. 8, 2026

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate ended flat on Tuesday near the Reserve Bank of India's Standing Deposit Facility rate for the second straight day due to a lack of demand for funds from banks, dealers said. An INR-10-trillion surplus in the banking system was enough for the weighted average call rate to continue below the SDF rate and outside the bounds of the RBI's Liquidity Adjustment Facility corridor.

The one-day call money rate ended at 5.05%, unchanged from Monday. The weighted average call rate was 4.98%, against 4.97% on Monday. The trade volume in the contract was INR 99.04 billion at the time, compared to INR 103.30 billion on Monday.

The tri-party repo rate for one-day loans ended at 4.00%, sharply below the floor of the RBI's policy corridor, and down from 4.50% Monday. The weighted average rate in the market was 4.58% Tuesday against 4.59% Monday. The volume in the tri-party repo market was INR 4.87 trillion Tuesday, slightly lower than INR 4.92 trillion Monday.

After rising for 10 straight days, the RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was at INR 10.36 trillion Monday, down from INR 11.16 trillion Sunday. Outflows for excise duty and tax deducted at source payments, as well as the settlement of the weekly gilt auction, drained liquidity. Moreover, most banks had swapped the bulk of their foreign currency non-resident (banks) deposits with the RBI under its special window before it ends on Friday and the scale of those conversions had likely fallen, dealers said. 

"If you think about it, it looks like the bulk of the liquidity from the FCNR(B) flows should be within the system by now, so we may have seen the peak of the surplus," a dealer at a private-sector bank said. "Still, the only thing that people are looking to next is what the RBI will do to extract liquidity, rather than thinking of anything about borrowing money." 

To push overnight rates above the RBI's Standing Deposit Facility rate, the market expects the central bank to announce durable measures to drain liquidity, such as raising banks' cash reserve ratio by 100 basis points to 4.00%. Some market participants expect such durable liquidity measures by the end of the week, while others only see them being implemented by the next Monetary Policy Committee meeting in early October, dealers said. The RBI took all INR-4.18-trillion offers at the overnight VRRR auction for INR 5.00 trillion Tuesday at a cut-off rate of 5.24%, against the reversed amount of INR 3.53 trillion. 

OUTLOOK

Wednesday, the one-day call rate is seen near the RBI's Standing Deposit Facility amid hefty surplus liquidity. Market participants in need of cash are likely to prefer borrowing funds from the tri-party repo market, leading to poor volume in the call market, dealers said. 

The banking system liquidity could rise to near INR 12 trillion this week as the window for swapping FCNR(B) deposits ends on Friday, dealers said. Attention will be on the RBI's liquidity measures to bring the weighted average call rate back to the policy corridor. The central bank will conduct an overnight, INR-5.00-trillion VRRR auction at 0930-1000 IST Wednesday. 

Outflows for advance tax and goods and services tax payments later this month will drain about INR 4.50 trillion. By the RBI's next policy meeting in October--which is the same day as the reversal of the 30-day VRRR--core systemic liquidity is likely top INR 10 trillion, which could merit permanent measures to drain the liquidity surplus, dealers said. Dealers expect the one-day call rate at 4.00–5.20% Wednesday. The one-day tri-party repo rate is expected to be in the 3.50–5.15% band. 

CALL RATE

5.05%--Tuesday close for one-day loans

5.00%--Tuesday open for one-day loans

5.05%--Monday close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below SDF rate; mkt sees more overnight VRRR ops this wk

MUMBAI – The one-day interbank call money rate remained below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% owing to a lack of demand for funds as the liquidity surplus in the banking system remained above INR 10 trillion. Dealers expect the central bank to continue using temporary liquidity draining measures such as overnight variable rate reverse repo auctions amid excess liquidity surplus. They also expect the central bank to announce more durable measures to drain liquidity from the banking system.

The tri-party repo rate for one-day loans ended at 4%, sharply below the RBI's floor rate, and down from 4.50% Monday. The weighted average rate in the market was 4.58% Tuesday against 4.59% Monday. Despite low rates in the market, the volume remained above INR 4 trillion, which is usually the case. The volume in the tri-party repo market was INR 4.87 trillion Tuesday, down from INR 4.92 trillion Monday. This was in line with the volume seen a month ago when overnight rates were within the RBI's Liquidity Adjustment Facility corridor.

"Mutual funds are lending in TREPS despite low rates as they usually have excess cash and they will have to deploy it at some rate," a dealer at a primary dealership said. Dealers said non-banking finance companies, primary dealerships, and some banks were seen borrowing in the tri-party repo market at low rates. "Some banks are borrowing in TREPS and parking it either in VRRRs or SDF," a dealer at a state-owned bank said.   

To push overnight rates above the RBI's Standing Deposit Facility rate, the market expects the central bank to announce durable measures to drain liquidity, such as an incremental hike of the cash reserve ratio by 100 basis points. Market participants expect such durable liquidity measures by the end of the week.

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was at INR 10.36 trillion Monday, down from INR 11.16 trillion Sunday due to outflows for excise duty and tax deducted at source.

Dealers also expect the RBI to continue with its overnight VRRR auction on a daily basis. A few expect the central bank to conduct another 30-day VRRR auction with pre-maturity reversal option. The RBI took all INR 4.18-trillion offers at the overnight VRRR auction for INR 5 trillion Tuesday. Dealers expect the RBI to conduct an overnight VRRR auction for INR 5 trillion Wednesday as well.

These VRRR auctions, along with durable liquidity drain-out measures, will help the RBI maintain the weighted average call rate around its operational target of 5.25%, which is the current policy rate. However, until the RBI announces any of the permanent measures to drain liquidity, the weighted average rate in the tri-party repo market is likely to be at 4.50-4.60% and that in the call money market is seen around 5%, dealers said. 

At 1727 IST, the weighted average call rate was 4.98%, against 4.97% Monday. The one-day call money rate was 4.50%, down from 5.05% Monday. The trade volume in the contract was INR 95.94 billion at the time, compared to INR 102.80 billion at 1735 IST Monday.  (J. Navya Sruthi)

India Call: At RBI SDF rate; liquidity eases slightly on excise duty outflow

MUMBAI – The one-day call money rate was at the Reserve Bank of India's Standing Deposit Facility of 5.00% Tuesday. The surplus liquidity in the banking system remained above INR 10 trillion Monday but decreased slightly due to payments for tax deducted at source and payments for gilts, dealers said. Funds parked at the RBI's SDF Monday fell to the lowest since Aug. 27, while cash balances rose slightly. Some traders expect the RBI to continue conducting overnight variable rate reverse repo operations for the rest of the month, while others expect measures to drain durable liquidity this month itself. Albeit, natural demand for funds is seen picking up going into the rest of the month, pushing up the weighted average call rate—the central bank's operating target—to the repo rate, dealers said. 

By end of this week, demand for funds will pick up ahead of the long weekend, when money markets will be shut but banks will have to make payments for advance tax for about INR 2 trillion to INR 3 trillion by Sept. 15, with upward pressure for reporting fortnight-end requirements also seen, dealers said. Indian financial markets are shut Monday for Ganesh Chaturthi. Further, quarter-end credit disbursements and an uptick in credit growth nearing the festive season is likely to push up the call rate, dealers said. "Just for two-, three- days I don't think RBI will bring about a permanent measure, it will continue with VRRRs, because advance tax is on the long weekend," a dealer at a private-sector bank said. After the RBI's INR-5-trillion, overnight VRRR conducted Tuesday, some dealers expect a second such operation for a smaller size the same day while others said due to demand for initial public offerings, the RBI is unlikely to conduct such an auction. 

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--fell to INR 10.36 trillion Monday from INR 11.16 trillion Sunday. At 0945 IST, the one-day call rate was at 5.00% against 5.05% Monday. The weighted average call rate was 5.00%, from 4.97% Monday. The trade volume was INR 10 billion at 0945 IST, while there was no trade in this contract at the same time Monday. The one-day tri-party repo rate was 4.65%, against 4.50% Monday. The weighted average rate was 4.63%, from 4.59% Monday. The volume on the same contract was INR 2.18 trillion at 0945 IST against INR 891.65 billion at 0930 IST Monday.  (Cassandra Carvalho)  End

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

Edited by Deepshikha Bhardwaj

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