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Informist, Thursday, Sept. 24, 2026

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate ended at the Reserve Bank of India's policy repo rate due to late demand for funds from some banks after the tri-party repo market closed, dealers said. Some banks still needed to borrow heavily to meet their daily funding needs after outflows for the payment of the goods and services tax earlier this week and were borrowing in the tri-party repo market earlier in the day as well. While the weighted average call rate fell Thursday, the weighted average tri-party repo rate was little changed.

"The big fall in the call rate is because it looks like government spending has hit the system early, since there is a strike next week," a dealer at a state-owned bank said. "But the spread between secured and unsecured market got erased today so it looked like mutual funds may have been facing redemptions and banks would have been active on the borrowing side throughout the day, especially those who have borrowing in call in the last two days."

Bank unions have called for a three-day strike Monday through Wednesday and the government has said it will hasten salary payments and other dues to Friday to avoid any disruptions. Even so, banks are likely to be on the borrowing side near the end of the September quarter as they seek to maximise credit disbursement.

On Thursday, the one-day call rate ended at 5.25%, up from 5.15% at open and 4.90% Wednesday. This was also the day's highest level. The weighted average call rate was 5.12%, down from 5.21% Wednesday. The volume in the one-day call money was INR 199.16 billion, sharply higher than INR 118.13 billion Wednesday.

On the contrary, the one-day tri-party repo rate ended at its low of 5.00% Thursday, lower than 5.15% at open but higher than 4.90% Wednesday. The weighted average rate was at 5.09% Thursday, similar to 5.10% Wednesday. The volume in the one-day contract was INR 5.41 trillion, higher than INR 5.28 trillion Wednesday.

The RBI net absorbed liquidity of INR 4.34 trillion, down from INR 4.44 trillion Tuesday. Against the reversal of around INR 750 billion, banks parked INR 1.01 trillion with the RBI at the overnight, INR-1.25-trillion variable rate reverse repo auction at 0930-1000 IST. As the overnight money market rate rose to and above the repo rate this week, banks drew down funds parked in long-term VRRRs with the RBI at the maximum rate of 5.24%, dealers said.

OUTLOOK

On Friday, the three-day call money rate is expected to open below the RBI's repo rate of 5.25% due to a large liquidity surplus in the banking system and inflows from the government's month-end spending. Outflows on account of the central bank's intervention in the foreign exchange market may drain liquidity, dealers said.

The RBI will conduct a three-day VRRR of INR 1.50 trillion Friday, dealers said. Banks are split on the kind of subscription to expect at the auction, with most expecting it may not be fully subscribed. However, since banks have reduced funds held in long-term VRRRs with the RBI, they may choose to use the short-term VRRRs to maximise returns, dealers said.

Some market participants expect the RBI to conduct more open market operation 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% Thursday, while the one-day tri-party repo rate is seen at 4.50-5.30%.

CALL RATE

5.25%--Thursday close for one-day loans

5.15%--Thursday open for one-day loans

4.90%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India Ltd.:

India Call: Below repo rate on lack of demand for funds; TREPs near SDF rate

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% Thursday due to lack of demand for funds, dealers said. The tri-party repo rate was near the RBI's Standing Deposit Facility rate of 5.00% due to a comfortable liquidity surplus in the banking system Wednesday even as it reduced slightly from Tuesday.

Systemic liquidity is set to get an early boost after the Centre Wednesday said it will pay salaries and pensions Friday, advancing its expenditure from the end of the month due to a three-day bank strike starting Monday. Dealers said the RBI has increased the size of its variable-rate reverse repo auction from INR 750 billion earlier to INR 1.25 trillion Thursday on early month-end spending by the government due to the scheduled nationwide strike by bankers starting Monday till Wednesday.   

At 0953 IST, the one-day call rate was at 5.15%, up from 4.90% Wednesday but sharply down from 5.30% at the opening Wednesday. The weighted average call rate was 5.15%, down from 5.21%. The volume in the one-day call money contract was INR 8.8 billion, against INR 670 million at 0930 IST Wednesday.

The one-day tri-party repo rate was at 5.07%, up from 4.90% Wednesday. The weighted average rate was at 5.10%, the same as Wednesday. The volume in the one-day contract was INR 2.65 trillion, against INR 1.4 trillion at 0930 IST Wednesday.

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was at INR 4.34 trillion, down from INR 4.44 trillion Tuesday as banks increased their cash balances with the RBI to INR 8.11 trillion from INR 8.1 trillion. Some dealers said the liquidity surplus is down due to intervention by the RBI in the forex market. 

At the overnight, INR-750-billion VRRR auction Wednesday, the RBI got INR 879.93 billion offers and accepted INR 750.26 billion at a cut-off rate of 5.24%. The RBI conducted an overnight VRRR of INR 1.25 trillion from 0930 IST to 1000 IST Thursday.

"Main purpose of VRRR is to keep rates in a range. Rates were near repo rate yesterday (Wednesday) so there was no second VRRR," a dealer at a state-owned bank said. "People are withdrawing from 30-day and 26-day VRRR auctions and MIBOR is also above SDF rate so probably we can see around INR 1 lakh crore (trillion) subscription today," a dealer at a private sector bank said.

According to an Informist poll, market participants expect INR 1 trillion to INR 1.25 trillion subscriptions at the overnight VRRR auction Thursday, with a median at INR 1 trillion at a cut-off of 5.24%. Dealers expect the weighted average call rate to be below the RBI's repo rate around 5.15-5.20% and that of tri-party repo rate at 5.00-5.05%. (J. Navya Sruthi) End

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

Edited by Pankaj Aher

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