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Informist, Tuesday, Oct. 6, 2026

 

By J. Navya Sruthi 

 

MUMBAI – The one-day interbank call money ended slightly below the Reserve Bank of India's repo rate of 5.25% on Tuesday due to a lack of demand for funds in the last leg of trade, dealers said. Traders were also cautious ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome due Wednesday, dealers said.

 

The call money rate was in line with the tri-party repo rate Tuesday, despite being slightly higher than Monday. "Yesterday (Monday) was an anomaly, but today (Tuesday) rates were normal," a dealer at a state-owned bank said. "There is around 10 bps (basis points) difference between call and TREPs (tri-party repo rate), which is normal," the dealer said. 

 

The one-day call rate ended at 5.20%, up from 4.80% Monday. The weighted average call rate fell to 5.12% Tuesday from 5.17?rlier in the day as demand for funds eased after meeting the borrowing requirement in the initial hours. The weighted average call rate was 5.09% Monday. The volume in the contract was INR 126.77 billion, slightly lower than INR 128.96 billion Monday.

 

The tri-party repo rate ended at 4.75%, down from 5.00% Monday. The weighted average rate was 5.06%, down from 5.08% Monday. Trade volume in the contract was INR 5.22 trillion, down from INR 5.26 trillion Monday. 

 

Dealers said small private sector banks were seen borrowing in the overnight market for regular funding requirements, while mutual funds were lending in the tri-party repo market. Large public sector banks and private-sector banks were seen lending in the call money market. 

 

Even as overnight borrowing rates remained low, banks still lent funds because of a lack of avenues with higher returns, dealers said. "After the VRRR auction, there are no avenues left for banks to invest their remaining funds other than parking at SDF for 5%. So, banks lent at 5.10-5.14% in call or TREPs instead of parking at SDF for just 5%," a dealer at a primary dealership said.  

 

OUTLOOK

Wednesday, the one-day call money rate is expected to hover near the RBI's repo rate of 5.25%. Dealers said rates might rise slightly due to outflows of INR 500 billion for excise duty payments and tax deducted at source. They expect the tri-party repo rate to open around 5.10%, similar to that on Tuesday. 

 

"Rates may go up as we are expecting a rate hike, but rates will not shoot up because of ample liquidity," the dealer at the primary dealership said. "Liquidity is ample, and tomorrow (Wednesday) we also have inflows from 30-day and 26-day VRRRs," the dealer said.   

 

Wednesday, the reversal of two long-term VRRR auctions conducted in September and the overnight auction conducted earlier Tuesday are due. A total of INR 3.35 trillion will be reversed Wednesday to the banking system, which was parked with the RBI at these auctions. Some banks opted for the premature reversal option. At the 30-day, INR 7.00-trillion VRRR auction conducted on Sept. 7, banks parked INR 2.59 trillion, but after some banks chose a premature reversal, only INR 1.06 trillion of the total was still parked with the RBI as of Monday. Similarly, funds lent by banks to the RBI at the 26-day VRRR auction for INR 5.00 trillion on Sept. 11 were INR 604.49 billion, which fell to INR 369.49 billion as of Monday. 

 

Market participants remain cautious ahead of the RBI's Monetary Policy Committee's decision, due Wednesday. Most market participants expect the RBI to hike key interest rates by 25 bps Wednesday. Some market participants even expect a 50-bps rate hike, while a few do not expect the central bank to increase key interest rates. Dealers expect the one-day call rate to be at 5.10-5.50% on Wednesday, while the tri-party repo rate for one-day loans is seen at 5.05-5.50% on expectations of a 25-bps rate hike.

 

Dealers expect the RBI to conduct an overnight VRRR auction after the policy announcement on Wednesday. Dealers also expect the central bank to announce liquidity measures to drain excess liquidity in the banking system. They expect durable liquidity draining measures such as open market operations sales auctions and temporary draining measures such as long-term VRRR auctions. 

 

BENCHMARK MIBOR (in %)

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

 

TENURE	TUESDAY	MONDAY
Overnight	5.19	5.13
3-day	--	--
14-day	5.71	5.72
1-month	5.92	5.92
3-month	6.34	6.34

 

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India Call: Near RBI repo early demand for funds from primary dealerships

 

MUMBAI – The one-day interbank call money rate was near the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships, dealers said. Expectation that the overnight variable rate reverse repo auction for INR 2.50 trillion between 0930 IST and 1000 IST will be fully subscribed also pushed the rate near the policy rate, they added.   

 

"I think the VRRR must be fully subscribed, so rates have risen here (in the overnight borrowing market)," a dealer at a small-finance bank said. "Banks must have oversubscribed the auction and so rates opened higher. The RBI also wants rates to be near repo, so I don't think it will shoot over repo," the dealer said.

 

At 1012 IST, the one-day call rate was at 5.20%, up from 4.80% Monday, after risig to as high as 5.25%. The weighted average call rate was 5.21%, up from 5.09% Monday. The volume in the same contract was INR 7.50 billion, against INR 9.23 billion at 1030 IST Monday. 

 

At the same time, the tri-party repo rate was at 5.13%, up from 5.00% Monday. The weighted average rate was 5.11%, up from 5.08% Monday. Trade volume in the same contract was INR 2.45 trillion, against INR 2.40 trillion at 1030 IST Monday.

 

The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – was at INR 5.30 trillion Monday, up from INR 5.16 trillion on Sunday. Liquidity in the banking system improved as the banks reduced their cash balances with the RBI to INR 8.10 trillion Monday from INR 8.52 trillion Sunday. Some dealers said there were inflows related to government spending for a subsidy. However, they did not specify further details on what the spending was for or the quantum. 

 

The RBI continued with its overnight VRRR auctions to keep rates within the liquidity adjustment facility corridor. On Tuesday, it conducted an overnight VRRR auction for INR 2.50 trillion and INR 2.10 trillion is likely to be subscribed, according to the median in an Informist poll. Participants expect total offers between INR 1.28 trillion and INR 2.50 trillion at the auction and all cut-off estimates were at the highest level of 5.24%. 

 

Most dealers expect at least 80% subscription at the auction due to ample liquidity surplus in the banking system and lack of major outflows. "Excise duty and TDS (tax deducted at sources) outflows will start tomorrow (Wednesday), so today's (Tuesday's) auction we might also see full subscription," a dealer at a small-finance bank said. Market participants remain cautious ahead of the RBI's Monetary Policy Committee's decision, due Wednesday.  (J. Navya Sruthi)

 

End

 

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

 

With inputs from Kabir Sharma

Edited by Saji George Titus

 

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