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Informist, Wednesday, Sept. 30, 2026

 

By Aaryan Khanna

 

NEW DELHI – The one-day interbank call rate ended below the Reserve Bank of India's Standing Deposit Facility rate in an unusually quiet session to end the September quarter. Demand for funds from banks was subdued due to the large liquidity surplus in the banking system, which kept both overnight rates and trade volumes in check, dealers said.

 

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was INR 4.66 trillion Tuesday, down from INR 4.80 trillion Monday. The surplus, which was nearly 1.7% of banks net demand and time liabilities, was comfortable to meet marginal credit growth requirements at the quarter-end, dealers said.  Moreover, banks had planned for and prematurely redeemed funds parked at the RBI's long-term VRRRs in the run-up to Wednesday anticipating a spike in rates, they said.

 

The one-day call rate ended at 4.85%, down from 5.15% at the open and also at the close Tuesday. The weighted average call rate was 5.22%, up from 5.08% Tuesday. The volume in the one-day call money contract was INR 103.54 billion, nearly halving from INR 192.56 billion Tuesday.

 

The call money rate rose above the policy repo rate of 5.25?rly in the session as banks demanded higher rates to lend to primary dealers, looking to hold onto cash for their own needs. They also curtailed the funds parked at the RBI's overnight, INR-2.00-trillion variable rate reverse repo auction at 0930-1000 IST. Against the reversal of two VRRRs worth nearly INR 1.6 trillion, banks parked only INR 854.24 billion at the reverse repo auction Wednesday.

 

The one-day tri-party repo rate ended at 5.15% IST, up from 5.10% at the open and 5.01% Tuesday. The weighted average rate was at 5.07%, against 5.05% Tuesday. Volume in the one-day contract was INR 4.79 trillion, lower than INR 5.37 trillion Tuesday. 

 

"It was actually a relatively quiet day, which is basically what people had been expecting looking at the liquidity in the system," a dealer at a state-owned bank said. "If you see the opening levels, things were under control, then suddenly there was spike in the rates. After the VRRR subscription was announced, the weighted average rates have been coming down because of how well everyone managed their positions today. There was no demand."

 

OUTLOOK

On Thursday, the four-day call money rate is expected to open near the RBI's repo rate of 5.25% due to early demand for funds from primary dealers, dealers said. Government spending is likely to infuse more liquidity into the banking system over the next few sessions, which may drag overnight money market rates, they said. India's financial markets will be shut Friday for Gandhi Jayanti.

 

The RBI will conduct a four-day VRRR auction of INR 2.00 trillion at 0930-1000 IST Thursday. Traders expect around 70% subscription at the beginning of a new quarter and reporting fortnight. Dealers expect the four-day call rate to be at 4.50–5.30% Thursday, while the four-day tri-party repo rate is seen at 4.50-5.25%.

 

CALL RATE

4.85%--Wednesday close for one-day loans

5.15%--Wednesday open for one-day loans

5.15%--Tuesday close for one-day loans

 

BENCHMARK MIBOR (in %)

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

 

TENURE	TUESDAY	TUESDAY
Overnight	5.28	5.04
3-day	--	--
14-day	5.79	5.78
1-month	5.92	5.92
3-month	6.35	6.32

 

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India Call: Above repo rate on quarter-end demand for funds from banks

 

NEW DELHI – The one-day interbank call money rate was above the Reserve Bank of India's policy repo rate of 5.25% Wednesday due to demand for funds from banks at the end of the September quarter. Banks also demanded higher rates to lend to primary dealerships, which were the major borrowers in early trade as is usual, dealers said.

 

At 0955 IST, the one-day call rate was at 5.30%, up from 5.15% at the open and also at the close Tuesday. The weighted average call rate was 5.29%, up from 5.08% Tuesday. The volume in the one-day call money contract was INR 23.45 billion, up from INR 100 million at the same time Tuesday.

 

The one-day tri-party repo rate was at 5.12% at 0955 IST, up from 5.10% at the open and 5.01% Tuesday. The weighted average rate was at 5.14%, against 5.05% Tuesday. Volume in the one-day contract was INR 1.37 trillion, lower than INR 1.46 trillion on the most-traded contract at 0930 IST Monday.

 

"We were expecting the rate to open at around 5.20% and then go higher later in the day as most banks should have prepared for the quarter-end, but now the rate is above the repo rate," a dealer at a state-owned bank said. "But this is a temporary thing, only for today and there is nothing alarming about it."

 

The prevailing liquidity surplus in the banking system may limit the rise in the call money rate to 5.50% at most, the Marginal Standing Facility rate, dealers said. At the end of the June quarter, the call money rate had ended near the MSF rate due to a liquidity deficit in the banking system. 

 

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was INR 4.66 trillion Tuesday, down from INR 4.80 trillion Monday. The fall in the liquidity surplus may be the effect of the settlement of the RBI's dollar sales in the spot market to limit the weakness of the rupee and sell-buy swaps in the dollar-rupee forwards markets to drain rupee liquidity, dealers said. Government spending had been advanced to Friday and Monday, adding to the liquidity surplus. It may only resume early in October as the payment for government schemes begins, with no significant inflow apparent on Tuesday despite such expectations, dealers said.

 

The rise in overnight rates is likely to dent the subscription at the RBI's INR-2-trillion variable rate reverse repo auction below expectations. Traders had expected a subscription of INR 1.00 trillion at a cut-off rate of 5.24%, according to the median of an Informist Poll. Most of the banks had anticipated early call money rates to be in the 5.15-5.25?nd and the overnight money market rates above the repo rate will disincentivise banks from parking funds with the RBI at 5.24%, dealers said. 

 

"There is no problem in borrowing as of now. The call market is seeing decent volumes at this 5.30% level," a dealer at a primary dealership said. "I don't foresee any problems also, banks will be happy to lend at these levels."  (Aaryan Khanna)  End

 

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

 

Edited by Avishek Dutta

 

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