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Informist, Tuesday, Sept. 22, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate Tuesday, as demand for funds eased near the end of the day. However, the weighted average rate remained near the repo rate as systemic liquidity on Monday fell to its lowest since Aug. 28. Liquidity fell on Monday due to goods and services tax outflows, along with some outflows for the RBI's intervention in the foreign exchange market, coupled with payments for gilt auctions, dealers said. Liquidity likely fell further Tuesday, marking over a week of steady declines, dealers said, due to INR 250 billion in outflows from Monday's open market sale auction. Quarter-end funding requirements kept demand for funds up, even as major tax outflows ended, dealers said. 

 

Some banks expecting to raise offshore funds have stalled those plans this month amid elevated rates, leading to more domestic borrowing, dealers said. Some banks are currently raising funds to shift their short-term borrowings to match their long-term liabilities, dealers said. "We've been told to pause (offshore) borrowing for at least a fortnight because rates are 1.50% (150 bps spread over the three-month Secured Overnight Financing Rate) and higher, which I feel is quite expensive," an official at a state-owned bank said. 

 

Traders also assessed the impact of the central bank's latest circular released Monday on market risk, with some viewing the move as a measure to boost available capital. 

 

On Tuesday, the one-day call rate ended at 4.90%, against 5.25% on Monday. The weighted average call rate was 5.24%, the same as Monday. Volume in the one-day call money contract was INR 157.82 billion, slightly lower than INR 163.91 billion Monday. The one-day tri-party repo rate ended at 4.92% Tuesday, from 5.04% Monday. The weighted average rate was at 5.13% Tuesday, down from 5.16% Monday. Volume in the one-day contract was INR 5.52 trillion, up from INR 5.30 trillion Monday.

 

OUTLOOK

On Wednesday, the one-day call money rate is expected to open near the RBI's repo rate of 5.25%, as banks borrow for credit disbursement and internal operations near quarter-end. Outflows to settle the central bank's intervention in the foreign exchange market are likely to continue draining liquidity, dealers said.

 

The RBI will conduct an overnight VRRR of INR 750 billion Wednesday. Some market participants expect the RBI to conduct more open-market operations auctions to sell gilts next month after announcing INR 1 trillion worth of such sales in September. Dealers expect the one-day call rate to be at 4.50–5.40% Wednesday, while the one-day tri-party repo rate is seen at 4.50-5.30%.

 

CALL RATE

4.90%--Tuesday close for one-day loans

5.30%--Tuesday open for one-day loans

5.25%--Monday close for one-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.30	5.28
3-day	--	--
14-day	5.85	5.81
1-month	5.94	5.93
3-month	6.34	6.34

 

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India Call: Below SDF; market sees regular VRRRs despite fall in liquidity

 

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's Standing Deposit Facility as demand for funds eased, dealers said. However, the weighted average call rate was near the RBI's policy rate of 5.25% as liquidity in the banking system fell to the lowest level since Aug. 28.

 

Even as the weighted average call rate, the operating target of monetary policy, was near the repo rate, market participants expect the central bank to continue to conduct daily overnight variable rate reverse repo auctions due to ample liquidity. However, they expect the size of the auction to be lower compared with last week. Dealers expect the RBI to conduct VRRR auctions with notified amount of INR 500 billion to INR 750 billion, sharply down from INR 1 trillion to INR 2 trillion seen last week. 

 

"Net liquidity is comfortable, we still have 4 lakh crore (INR 4 trillion) liquidity surplus, so they will continue with VRRR auctions, but amount would be around 50,000-75,000 crores (INR 500 billion to INR 750 billion)," a dealer at a primary dealership said. Dealers expect the liquidity surplus in the banking system to be at INR 3.50 trillion to INR 4.00 trillion by the end of September as major outflows for the month were completed.

   

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was INR 4.92 trillion Monday, the lowest level since Aug. 28 and sharply down from INR 6.05 trillion Sunday. Banking system liquidity fell due to outflows of around INR 1.8 trillion Monday for goods and services tax payments, dealers said.

 

At Tuesday's overnight, INR-750-billion VRRR auction, the RBI took all INR-719.71-billion offers and set a cut-off rate at 5.24%. After the announcement of the result of the VRRR auction, rates in the overnight borrowing markets fell. "We are expecting it (VRRR auction) to be fully subscribed as TREPs (tri-party repo market) rates were around 5.20%," a dealer at a private sector bank said. Dealers expect the weighted average call rate to remain at 5.20–5.25% and that of the tri-party repo rate at 5.10-5.20% going forward.   

 

At 1532 IST, the one-day call rate was 4.90%, down from 5.25% Monday. The weighted average call rate was 5.26%, against 5.24% Monday. The trade volume on the same call money contract was INR 122.80 billion, against INR 145.25 billion at 1530 IST Monday. At the same time, the one-day tri-party repo rate was 4.95%, compared with 5.04% Monday. The weighted average rate was 5.14%, against 5.16% Monday. The volume on the same contract was INR 5.16 trillion at the same time, against INR 4.88 trillion at 1530 IST Monday.  (J. Navya Sruthi)

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India Call: Above repo rate as liquidity surplus at lowest since Aug 28

 

--RBI net liquidity absorbed at INR 4.92 tln Mon, lowest since Aug 28 

 

MUMBAI – The one-day interbank bank call money rate Tuesday was above the Reserve Bank of India's policy rate of 5.25% as the liquidity surplus in the banking system fell to its lowest since Aug. 28, dealers said. Despite the lack of major outflows scheduled for the day, dealers expect the call rate and the tri-party repo rate to trade around the policy rate Tuesday.

 

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was INR 4.92 trillion Monday, the lowest level since Aug. 28 and sharply down from INR 6.05 trillion Sunday. Banking system liquidity fell due to outflows of around INR 1.8 trillion Monday for goods and services tax payments, dealers said. Cash balances maintained by banks with the RBI also rose to INR 8.22 trillion Monday from INR 8.16 trillion Sunday, which also pulled down the banking system's liquidity.  

 

At 0956 IST, the one-day call rate was 5.30%, up from 5.25% Monday. The weighted average call rate was 5.30%, against 5.24% Monday. The trade volume in the same call money contract was INR 37.72 billion, against INR 8.9 billion at 0940 IST Monday. At the same time, the one-day tri-party repo rate was 5.20%, compared to 5.04% Monday. The weighted average rate was 5.20%, against 5.16% Monday. The volume on the same contract was INR 2.2 trillion at the same time, against INR 909.67 billion at 0930 IST Monday. 

 

Even though the liquidity surplus in the banking system fell Monday, it was still nearly 2% of the net demand and term liabilities, because of which the RBI continued with its temporary liquidity draining measures. Dealers expect moderate participation at the overnight, INR-750-billion variable rate reverse repo auction Tuesday.

 

Some dealers expect subscriptions at the auction to be as low as INR 150 billion due to higher overnight borrowing rates. "Not quite positive about good subscription at today's (Tuesday) auction," a dealer at a small-finance bank said. "Subscription may be between INR 10,000-20,000 crores (INR 100 billion to INR 200 billion)," the dealer said. 

 

"When I am getting opportunities in other segments to invest, why will I prefer VRRR? Call is at 5.30%, so people will try to lend there," a dealer at a private sector bank said. According to the median in an Informist poll of eight market participants, total offers are between INR 150 billion and INR 700 billion at the auction, with a median estimate of INR 500 billion. All cut-off estimates were at the highest level of 5.24%.  (J. Navya Sruthi)

 

End

 

US$1 = INR 95.5900

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

 

Edited by Saji George Titus

 

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