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Informist, Wednesday, Jul. 8, 2026

 

By Cassandra Carvalho and J. Navya Sruthi

 

MUMBAI – The one-day interbank call money rate ended above Tuesday's close as well as the Reserve Bank of India's repo rate of 5.25% Wednesday, with the one-day tri-party repo rate ending at the Marginal Standing Facility, as mutual funds faced redemption and some foreign exchange-related outflows were likely to have been recorded, dealers said. Some traders said panic-borrowing of funds due to fears of resumption in the West Asia war also pushed up the call rate.   

The tri-party repo rate was around 5.50% for at least the last 30 minutes of the trading session due to demand for funds from some market participants who were waiting to borrow towards the end of trade, expecting rates to fall. "People (borrowers) didn't cover in the early hours thinking that rates will fall more later," a dealer at a state-owned bank said. 

 

Some dealers and fund managers also said that high rates in the overnight market were because of intervention by the Reserve Bank of India in the foreign exchange market. Some traders speculated that the RBI was utilising inflows from foreign currency non-resident bank deposits to take delivery of its outstanding forward book, while its intervention in the rupee spot market was also likely to have been draining rupee liquidity, dealers said. The surplus liquidity in the banking system was also skewed, with some banks seeing improved liquidity due to inflows from foreign currency non-resident bank deposits, dealers said, so others had to borrow from variable rate repo auctions, they said.

 

"Whoever is not getting flows is raising CDs (certificates of deposit) or borrowing in overnight," a dealer at another state-owned bank said. 

Some dealers expect the RBI to conduct a variable rate repo auction for INR 500 billion or INR 750 billion to roll over the reversals of two VRR auctions. On Monday, the RBI infused INR 146 billion through a three-day VRR auction to support the banking system amid outflows of around INR 500 billion for excise duty and tax deducted at source payments. On Wednesday, the central bank conducted an overnight operation of INR 250 billion, but the auction was poorly subscribed at INR 6.65 billion. Others do not expect further operations after poor subscription at VRRs this week and maturity of a gilt Thursday.  

 

The one-day call money rate ended at 5.30%, against 5.25% Tuesday. The weighted average call rate was 5.27%, against 5.25% Tuesday. The volume in the market was INR 227.82 billion Wednesday, against INR 178.77 billion Tuesday. The one-day tri-party repo rate ended at 5.50%, against 6.00% at close Tuesday. The weighted average rate was 5.20%, up from 5.14% the previous day. The volume in the TREPS market was INR 4.50 trillion, slightly lower than INR 4.55 trillion in the previous session.

 

OUTLOOK

On Thursday, the one-day interbank call money rate is seen at the RBI's repo rate of 5.25% as the liquidity surplus is likely to reduce, dealers said. Traders will also gauge any liquidity drain from intervention by the RBI in the spot rupee market. However, liquidity conditions are expected to improve in the near term as foreign currency non-resident bank deposits are expected to pick up pace. Banks hedging deposits under the central bank's concessional swap window will gain rupee liquidity, potentially easing money market rates, dealers said. The RBI may avoid conducting a VRR due to maturity of the 8.33%, 2026 gilt with an outstanding of over INR 310 billion Thursday, dealers said. 

 

Dealers expect the call rate to be at 4.60–5.30% Thursday. The tri-party repo rate is expected to be in the 4.90–5.20?nd. The weighted average call rate is expected to be in the 5.20–5.30?nd, and that in the tri-party repo market is likely to be in the 5.10–5.20?nd, they said.

 

CALL RATE

5.30%--Wednesday close for one-day loans

5.30%--Wednesday open for one-day loans

5.25%--Tuesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	WEDNESDAY	TUESDAY
Overnight	5.30	5.29
3-day	--	--
14-day	5.72	5.71
1-month	6.06	6.05
3-month	6.49	6.47

 

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India Call: Down on lack of major outflows, sufficient liquidity

 

MUMBAI – The one-day interbank call money rate fell from its opening level Wednesday and was near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to lack of any significant outflows amid sufficient liquidity surplus in the banking system, dealers said. Rates in the overnight market are expected to remain near the lower end of the liquidity adjustment facility corridor on lack of demand for funds Wednesday, they said. 

 

Earlier in the day, the RBI conducted an overnight variable rate repo auction of INR 250 billion. Demand at the overnight VRR auction was poor and bids amounted to just INR 6.65 billion as market participants found borrowing in the tri-party repo market cheaper than the cut-off rate at the auction, which is required to be above the repo rate, dealers said. The tri-party repo rate was below the RBI's repo rate in a range of 5.14-5.16% during the auction, making it a more attractive source of funds than the VRR window, they said. 

 

"(The) RBI probably wants to keep overnight rates closer to the repo rate (5.25%)," a dealer at a public sector bank said. "They may feel a VRR auction is needed to keep rates around the policy repo rate." Some dealers said the central bank might have conducted the small-sized VRR auction to meet the temporary funding requirements of a few banks that could be facing short-term cash shortages, despite the overall liquidity in the banking system remaining sufficient. 

 

The net liquidity absorbed by the RBI, which is a proxy for surplus in the banking system, was INR 1.26 trillion Tuesday, up from INR 1.19 trillion Monday. Liquidity increased as cash balances with the RBI decreased. Cash balances with the RBI were INR 7.84 trillion Tuesday, lower than the average daily requirement of INR 7.98 trillion for the fortnight ending Jul. 15. 

 

The expected outflow of excise duty was not evident in the system. Some said the outflow may have been too small to materially affect liquidity in the banking system, while others said it was likely offset by the government's month-end spending. The expected amount for excise duty outflow was around INR 500 billion. 

 

At 1338 IST, the one-day call rate was 4.95%, down from 5.30% at open and 5.25% Tuesday. The weighted average call rate was 5.28%, up from 5.25% Tuesday. The trading volume in the overnight market was INR 168.04 billion, against INR 116.92 billion at 1330 IST Tuesday. At 1338 IST, the one-day tri-party rate was 5.16%, up marginally from its opening level but sharply below 6.00% at Tuesday's close. The weighted average tri-party rate was 5.15%, up from 5.14% Tuesday. The trade volume was INR 3.42 trillion, against INR 3.43 trillion at 1335 IST Tuesday.  (Shumaila Firoz) 

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India Call: Above repo rate on early demand but VRR seen under subscribed

 

MUMBAI – The one-day call money rate was above the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks, dealers said. However, the tri-party repo market rate was below the RBI's repo rate due to enough liquidity surplus in the banking system. With a low tri-party repo rate and sufficient liquidity surplus in the banking system, dealers expect the overnight variable rate repo auction for INR 250 billion to be under subscribed Wednesday.  

 

At 1002 IST, the one-day call rate was at 5.30%, up from 5.25% Tuesday. The weighted average call rate was at 5.30%, up from 5.25% Tuesday. The volume in the overnight market was INR 93.24 billion, compared with INR 45.91 billion at 0930 IST on Tuesday. At the same time, the tri-party repo rate for one-day loans was at 5.15%, down from 6% Tuesday, with a volume of INR 1.66 trillion. The market volume was INR 1.39 trillion at 0930 IST on Tuesday. The weighted average rate was 5.15%, up from 5.14% Tuesday.  

 

The systemic liquidity was INR 1.26 trillion Tuesday, up from INR 1.19 trillion Monday as the cash balances reduced by INR 435.69 billion Tuesday. Cash balances with the RBI were INR 7.84 trillion Tuesday, lower than the average daily requirement of INR 7.98 trillion for the fortnight ending Jul. 15.

 

Although net liquidity absorbed by the RBI, which is a proxy for liquidity surplus, rose Tuesday, there was liquidity drain, including the excess cash balance with the central bank, dealers said. This fall in liquidity surplus was due to outflows of INR 400 billion to INR 500 billion for excise duty and tax deducted at source payments, they said. 

 

Dealers said the RBI has been conducting VRR auctions on a daily basis to support some banks due to outflows of tax payments. Some dealers also said these liquidity infusion operations were due to a drain on liquidity caused by intervention in the forex market to support the domestic currency.

 

"There is enough liquidity in the banking system and rates are also comfortable. So it (VRR auction) will be under subscribed," a dealer at a primary dealership said. Some dealers also said the central bank wants the overnight call rate to be below the RBI's repo rate, which is why it has been conducting these auctions.   

 

The RBI conducted an overnight VRR auction for INR 250 billion between 0930 IST and 1000 IST Wednesday. According to the median of 11 estimates in an Informist poll, the subscription is expected to be at INR 50 billion, and the cut-off is seen at 5.26%. Dealers expect the weighted average call rate at 5.25-5.30% during the day.  (J. Navya Sruthi) 

 

End

 

Edited by Avishek Dutta

 

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