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Informist, Saturday, Jul. 4, 2026 

 

By Shumaila Firoz 

 

MUMBAI – The two-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% on Saturday due to low demand for funds amid improved liquidity in the banking system, dealers said. Trading activity remained subdued, with volume significantly lower than on weekdays, as is typical for Saturdays when most banks have already met their funding requirements in the previous trading session, they said.

 

The two-day call rate ended at 4.85%, down from Friday's close of 5.28% for three-day loans. The weighted average call rate was 4.88%, also down from 5.28% Friday. The volume of trades in the call money market was INR 7.45 billion, sharply down from INR 184.82 billion in the previous session.

 

The tri-party repo market rate for two-day loans ended at 4.80%, down from 5.10% at Friday's close for three-day loans. The weighted average rate was 4.88%, also down from 5.10% for three-day loans Friday. The volume in the broader tri-party repo market was INR 117.65 billion, sharply down from INR 4.93 trillion Friday.  

 

The central bank, post market hours Friday, announced a three-day variable rate repo auction of INR 750 billion for Monday. Wednesday, the central bank had infused INR 296.95 billion through a two-day VRR auction, which was reversed on Friday. "(The) existing VRR matured on Friday. Additionally, government securities of INR 340 billion are scheduled to settle on Monday, prompting (the) RBI to announce VRR," a dealer at a public-sector bank said. "RBI also likely intends to keep the weighted average call rate below a certain level, as it has remained above the repo rate despite the absence of any major fund outflows." 

 

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 864.68 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. 

 

OUTLOOK 

On Monday, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to early demand for funds from primary dealers and some banks, dealers said. The settlement of government bonds worth INR 340 billion, sold at Friday's gilt auction and payment scheduled for Monday, is expected to drain liquidity from the banking system. In addition, outflows related to excise duty and tax deducted at source payments due on Tuesday are likely to withdraw another INR 500 billion to INR 600 billion from the banking system, further tightening liquidity in the banking system. 

 

However, liquidity conditions are expected to improve later in the week as the maturity of the 8.33%, 2026 government bond, with an outstanding amount of over INR 310 billion, is scheduled for Thursday. 

 

The RBI's measure to provide transient liquidity through a three-day VRR auction scheduled Monday between 0930 IST and 1000 IST for INR 750 billion is likely to keep the call rate at or below the RBI's repo rate later in the day. Subscription at the auction will depend upon the overnight market rates during that time. If the tri-party repo rate remains below the RBI's repo rate of 5.25%, dealers expect the auction to be poorly subscribed. Earlier this month, the central bank had infused INR 296.95 billion through a two-day VRR auction Wednesday. 

 

CALL RATE

4.85%--Saturday close for two-day loans

4.85%--Saturday open for two-day loans

5.28%--Friday close for three-day loans 

 

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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