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Informist, Friday, Jul. 3, 2026

 

By Aaryan Khanna

 

NEW DELHI – The three-day interbank call money rate rose and ended above the Reserve Bank of India's repo rate of 5.25% on Friday as banks met their three-day funding needs by borrowing in the call money market after the tri-party repo market closed at 1600 IST, dealers said. The rates climbed especially after 1700 IST, when there was a paucity of lenders in the market, and banks had to cover cash outflows expected over the weekend, they said. 

 

The three-day call money rate ended at 5.28%, sharply up from 4.60% for one-day loans Thursday. However, the weighted average call rate was at 5.28%, similar to 5.27% Thursday. The volumes in the most-traded contract rose to INR 184.82 billion Friday from INR 169.96 billion Thursday.

 

"Things were in check for a large part of the day, there was no hassle," a dealer at a private-sector bank said. "I think it was the usual condition of some late borrowers hitting the market and not finding any lenders. Liquidity is also not as much of a surplus yet, where no bank has to tap the market anymore, there is still a mismatch."

 

The net liquidity absorbed by the RBI – an indication of surplus liquidity in the banking system – was INR 994.72 billion Thursday, up from INR 864.69 billion Wednesday, according to the latest data. The liquidity surplus improved as banks trimmed their cash balances with the RBI by INR 140 billion overnight, dealers said. There were no major inflows or outflows Friday, they said.

 

The three-day tri-party repo rate ended at 5.10%, slightly up from 5.05% at close for one-day loans Thursday. The weighted average rate was unchanged from the previous day at 5.10%. The volume in the most-traded contract was INR 4.93 trillion, up from INR 4.78 trillion in the previous session. The reversal of a two-day variable rate repo auction worth INR 296.95 billion led to some demand from banks, but it was easily met by mutual funds, which were flush with cash at the beginning of the quarter, dealers said. 

 

OUTLOOK

On Saturday, the two-day interbank call money rate is expected to open below the RBI's repo rate of 5.25% due to usually poor demand for funds on Saturdays, dealers said. Most banks met their borrowing needs on Friday and are unlikely to tap the market Saturday, pulling down trade volumes as well, they said.

 

Liquidity conditions are expected to improve next week as foreign currency non-resident bank deposits are expected to pick up the pace. Banks hedging deposits under the central bank's concessional swap window will gain rupee liquidity, potentially easing money market rates, dealers said. Later in the week, the maturity of the 8.33%, 2026 gilt with an outstanding of over INR 310 billion Thursday will also add to systemic liquidity. 

 

However, tax deducted at source and excise duty outflows by Tuesday as well as the settlement of the INR 340 billion weekly gilt auction Monday may lead to a temporary tightness in liquidity again unless banks draw down their cash balances with the RBI, dealers said. After market hours Friday, the RBI announced a three-day variable rate repo auction for INR 750 billion on Monday. The auction is likely to be poorly subscribed, dealers said.

 

Dealers expect the call rate to be at 4.60–5.40% Monday. The tri-party repo rate is expected to be in the 4.90–5.45?nd. The weighted average call rate is expected to be in the 5.20–5.35?nd, and that of the tri-party repo market is likely to be in the 5.05–5.30?nd, they said.

 

CALL RATE

5.28%--Friday close for three-day loans

5.30%--Friday open for three-day loans

4.60%--Thursday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.33	5.33
3-day	--	--
14-day	5.77	5.81
1-month	6.08	6.10
3-month	6.50	6.52

 

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India Call: Cools after early spike; improving liquidity keeps rates in check

 

MUMBAI – The three-day interbank call money rate fell from its opening level on Friday and traded near the Reserve Bank of India's Standing Deposit Facility rate of 5.00%. Demand from primary dealers and some banks eased in the absence of any major outflows amid a liquidity surplus, dealers said. However, the weighted average call rate remained above the RBI's repo rate of 5.25% due to hefty borrowing in the initial hours of trade, they said. Some public-sector banks and small finance banks were active on the borrowing side, dealers said. 

 

At 1230 IST, the three-day call rate was 5.05%, lower than 5.30% at the open but higher than 4.60% at Thursday close for one-day loans. The weighted average call rate was 5.32%, up from 5.27% Thursday. At 1230 IST, the trade volume in the overnight contract was INR 108.47 billion, similar to INR 108.35 billion at 1230 IST Thursday. 

 

The call rate had opened at 5.30% Friday due to the limited presence of lenders at the start of trade. "Credit growth has outpaced deposit growth, and instead of putting additional pressure on their statutory liquidity ratio holdings, banks prefer to meet short-term funding requirements through the call market," a dealer at a public-sector bank said. "Some public sector banks seen borrowing funds in the early session to meet their credit offtake requirements, which pushed rates higher at the open."

 

At 1230 IST, the three-day tri-party rate was 5.07%, lower than 5.10% at the open, but marginally higher than 5.05% at Thursday's close for one-day loans. The weighted average tri-party rate was 5.12%, marginally higher than 5.10% Thursday. At 1230 IST, the trade volume was INR 3.58 trillion, higher than INR 2.58 trillion at the same time Thursday. Quarter-end redemption pressure on mutual funds has ended. As fresh inflows come in at the start of the new quarter, they have excess funds available to lend in the overnight market, dealers said. 

 

The net liquidity absorbed by the RBI--an indication of surplus liquidity in the banking system--was INR 994.72 billion Thursday, up from INR 864.69 billion Wednesday, according to the latest data. The liquidity inched up as banks lowered their cash balances with the RBI to INR 8.64 trillion Thursday, from INR 8.78 trillion Wednesday. Cash balances are higher than the average requirement of INR 7.98 trillion for the fortnight ending Jul. 15.

 

Market participants do not expect the RBI to conduct a variable-rate repo auction in the coming sessions as liquidity conditions continue to improve through the month, dealers said. The central bank had injected transient liquidity through 13 VRR auctions in June. The weighted average call rate is also expected to drift down to the repo rate or lower as soon as next week. The maturity of the 8.33%, 2026 govermment bond with an outstanding of over INR 310 billion on Thursday will also add to liquidity with banks, dealers said. (Shumaila Firoz) 

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India Call: Edges above RBI's repo rate on early demand, 3-day cash needs 

 

MUMBAI – The three-day interbank call money rate rose above the Reserve Bank of India's repo rate of 5.25% Friday. The rise was because of low surplus liquidity in the banking system and early demand for funds from some banks and primary dealerships, dealers said. Primary dealers were more active ahead of Friday's gilt auction and some banks also stepped up borrowing to meet their cash requirements for three days, they said.

 

"Early demand from banks was largely driven by routine beginning-of-the-month payments," a dealer at a private-sector bank said. "Banks also borrowed to meet their cash requirements for the three-day interbank settlement cycle and replenish their cash balances. Meanwhile, primary dealers were more active ahead of the weekly gilt auction." Rates in the money market are expected to ease towards the lower end of the Liquidity Adjustment Facility corridor after market participants meet their initial borrowing requirements, dealers said.

 

At 0930 IST, the three-day call money rate was 5.35%, against Thursday's close of 4.60% for one-day loans. The weighted average call rate was 5.33%, against 5.27% the previous day. The traded volume in the call money market was INR 21.07 billion, similar to INR 21.98 billion at the same time Thursday. The three-day tri-party repo rate was 5.12%, up from 5.05% for one-day loans. The weighted average rate was 5.13%, against 5.10%. The turnover in the tri-party repo market was INR 1.24 trillion, higher than INR 978.53 billion Thursday.

 

Volumes in the overnight market are likely to be slightly higher than Thursday's levels as some banks are expected to borrow ahead of the weekend, dealers said.

 

The net liquidity absorbed by the RBI--an indication of surplus liquidity in the banking system--was INR 994.72 billion Thursday, up from INR 864.69 billion Wednesday, according to the latest data. The liquidity inched up as banks lowered their cash balances with the RBI to INR 8.64 trillion Thursday from INR 8.78 trillion Wednesday. Cash balances are higher than the average requirement of INR 7.98 trillion for the fortnight ending Jul. 15.

 

"There is (an) excise duty-related outflow for next week, but the amount is not significant," a dealer at another private-sector bank said. "I don't expect it to push money market rates much higher. The overnight market is likely to remain stable in the coming sessions until the GST-related outflows begin."  (Shumaila Firoz) 

 

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

 

Edited by Saji George Titus

 

 

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