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Informist, Thursday, Jul. 9, 2026

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money rate Thursday ended above the Reserve Bank of India's repo rate of 5.25% as well as above Wednesday's close, as surplus liquidity in the banking system dropped below the INR-1-trillion comfort mark. The RBI's recent dollar sales in the foreign exchange spot market to defend the rupee are likely to have drained systemic liquidity, while the central bank is also likely to have taken delivery of its maturing forward short positions, dealers said. 

 

The RBI conducted an overnight variable rate repo operation of INR 500 billion Thursday, which was not announced the previous day. The RBI took all bids worth INR 467.29 billion, the highest subscription seen at such an operation in the recent past. The RBI is expected to continue conducting VRRs to support short-term funding requirements, dealers said. However, traders do not expect any measures by the central bank to infuse durable liquidity, after it unveiled a slew of measures to attract foreign capital last month, they said. Recently, some inflows had come into the banking system through foreign currency non-resident bank deposits, but the RBI is likely to have taken the liquidity boost as an opportunity to take delivery of its maturing short forward positions, dealers said. Traders await further inflows into these deposits to boost systemic liquidity. 

 

"RBI is not going to conduct anything (besides VRRs), it will do everything through VRRs," a dealer at a private sector bank said. "We're waiting for this FCNR, ECB (external commercial borrowing), etc to come into the system." 

 

The one-day call money rate ended at 5.34% on Thursday, against 5.30% Wednesday. The weighted average call rate was also 5.34%, up from 5.27% Wednesday. The volume in the market was INR 248.93 billion on Thursday, against INR 227.82 billion Wednesday. The one-day tri-party repo rate ended at 4.99%, against 5.50% at close Wednesday. The weighted average rate was 5.27%, up from 5.20% the previous day. The volume in the TREPS market was INR 4.81 trillion, slightly more than INR 4.50 trillion in the previous session.

 

OUTLOOK

On Friday, the three-day interbank call money rate is seen at or above the RBI's repo rate of 5.25% amid tight liquidity, dealers said. Traders will continue to gauge the liquidity drain from intervention by the RBI in the spot rupee market. Post market hours on Thursday, the RBI said it would conduct a three-day VRR for INR 500 billion Friday, despite the redemption of the 8.33%, 2026 gilt of over INR 310 billion Thursday.

 

The outlook on expected inflows through the RBI's measures to shore up capital is seen hazy, with several banks yet to internally finalise their leveraging schemes on foreign currency non-resident bank deposits and some fundraisers refraining from overseas borrowing due to high spreads amid large supply. Systemic liquidity is expected to improve if foreign currency non-resident bank deposits 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. 

 

Dealers expect the call rate to be at 4.60–5.40% Friday. The tri-party repo rate is expected to be in the 4.90–5.50?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 5.10–5.30?nd, they said.

 

CALL RATE

5.34%--Thursday close for one-day loans

5.40%--Thursday open for one-day loans

5.30%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.40	5.30
3-day	--	--
14-day	5.74	5.72
1-month	6.07	6.06
3-month	6.51	6.49

 

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India Call: Near RBI's MSF rate on firm demand for funds on low liquidity

 

MUMBAI – The interbank call money rate was near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% Thursday due to firm demand for funds from primary dealerships and some banks as systemic liquidity fell below the comfortable level of INR 1 trillion, dealers said. They expect the call rate to remain firm during the day, but some relief is also expected due to inflows through bond redemptions.  

 

At 1035 IST, the one-day call rate was at 5.40%, up from 5.30% Wednesday. The weighted average call rate was at 5.41%, up from 5.27% Wednesday. The volume in the overnight market was INR 123.54 billion, compared with INR 116.60 billion at 1030 IST on Wednesday. At the same time, the tri-party repo rate for one-day loans was at 5.29%, down from 5.50% Wednesday, with a volume of INR 2.61 trillion. The market volume was INR 2.08 trillion at 1030 IST on Wednesday. The weighted average rate was 5.28%, up from 5.20% Wednesday.

 

The RBI's net liquidity absorbed, which is a proxy for liquidity surplus, was INR 741.81 billion Wednesday, down from INR 1.26 trillion Tuesday, according to the latest data. Dealers speculated that the liquidity surplus was down Wednesday due to intervention by the RBI in the forex market. Wednesday the rupee ended at a four-week low of 95.5550 a dollar as crude oil prices neared $80 per barrel after the US President said the memorandum of understanding with Iran was "over". 

 

However, some dealers also said the liquidity surplus fell due to outflows for excise duty and tax deducted at source. They expect the weighted average call rate to be at 5.30-5.40% and the weighted average rate in the tri-party repo market at 5.20-5.30% for the day. An inflow of around INR 330 billion for the redemption of gilt and coupon on state government bond is scheduled for Thursday, which might cap overnight rates at the current level.  

 

The central bank has conducted three variable rate repo auctions so far this week and infused only INR 164 billion to support the banking system, as all auctions were under subscribed. Dealers now expect the central bank to conduct a VRR auction on Friday to support the banking system liquidity. "So far, market didn't participate in VRRs, but RBI might get one tomorrow (Friday), then we can expect active participation," a dealer at a primary dealership said. (J. Navya Sruthi)

 

End

 

US$1 = INR 95.3875

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

 

Edited by Avishek Dutta

 

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