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Informist, Wednesday, Jul. 22, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money ended at the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Wednesday, cooling from closer to the Marginal Standing Facility rate at open. Amid outflows for goods and services tax, the surplus liquidity in the banking system fell to its lowest since Jun. 29. However, with ample funds parked by banks under the SDF and the weighted average tri-party repo rate being below the repo rate, demand for funds eased. The RBI conducted a two-day variable rate repo auction for INR 750 billion, which was poorly subscribed at INR 72 billion. 

"Around twenty-thousand crore (INR 200 billion) outflows will go today (Wednesday), not much," a dealer at a state-owned bank said. "Let's see where the SDF number goes by the end-of-day. Accordingly, we will know how much of a (liquidity) crunch banks are facing." Banks parked INR 1.29 trillion under the RBI's Standing Deposit Facility Tuesday, down from INR 1.54 trillion Monday, but still reflecting adequate liquidity with banks in spite of about INR 1.8 trillion of outflows for goods and services tax over a span of three days. With no major inflows until the Centre's expenditure for salaries and pensions starts by the end of the month, some traders expect the RBI to continue holding VRRs. Some do not expect more VRRs this week after poor subscriptions at previous operations. With durable liquidity coming into the banking system through the various measures the RBI had rolled out last month, the central bank is unlikely to conduct any operations to infuse durable liquidity, dealers said. However, of the $20.7 billion inflows received till Friday from Jun. 8, traders speculate that more than $6 billion of these inflows would have been depositors parking the same funds previously parked in foreign non-currency resident bank deposits at higher interest rates.  

The one-day call money rate ended at 5.00% Wednesday, down from 5.35% at close Tuesday. The weighted average call rate was 5.38%, inching higher from 5.35% Tuesday. The volume in the market was INR 152.78 billion Wednesday, lower than INR 198.65 billion the previous session. The one-day tri-party repo rate ended at 5.00%, higher than 4.98% Tuesday. The weighted average rate was 5.22%, inching lower from the previous day's 5.23%. The volume in the TREPS market was INR 4.62 trillion, higher than INR 4.53 trillion in the previous session.

OUTLOOK

On Thursday, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% as liquidity remains tight post outflows for goods and service tax payments, dealers said. Traders will also assess the drain on rupee liquidity due to the RBI's dollar sales in the foreign exchange spot market. Traders expect the RBI to continue to hold VRRs until the Centre's month-end expenditure begins, with the systemic liquidity seen falling into a deficit this week. Traders do not expect the RBI to conduct any measures to infuse durable liquidity amid inflows from foreign non-currency resident bank deposits. Dealers expect the call rate at 4.60–5.40% Thursday. The tri-party repo rate is expected to be in the 4.60–5.25% band. The weighted average call rate is expected to be in the 5.25–5.35% band, and that in the tri-party repo market is likely to be in the 5.10–5.25% band, they said.

CALL RATE

5.00%--Wednesday close for one-day loans

5.45%--Wednesday open for one-day loans

5.35%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call:Near SDF rate; tri-party repo rate above repo on poor VRR offtake

MUMBAI – The one-day interbank call money rate was near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as demand for funds eased, dealers said. However, the tri-party repo rate for one-day loans was slightly above the RBI's repo rate of 5.25% due to low liquidity surplus and poor subscription at the variable rate repo auction earlier Wednesday, they said.   

At 1311 IST, the tri-party repo rate for one-day loans was 5.30%, sharply higher than 4.98% Tuesday. The weighted average rate was 5.27%, up from 5.23% Tuesday. The volume in the tri-party market at the same time was INR 3.39 trillion, compared with INR 3.42 trillion at 1330 IST Tuesday. 

At 1311 IST, the one-day call rate was 5.05%, higher than 5.35% Tuesday. The weighted average call rate was 5.42%, up from 5.35% Tuesday. The volume at the same time was INR 110.50 billion, compared with INR 120.23 billion at 1330 IST Tuesday.

"All the auctions announced intraday usually have tepid subscription mostly, but then market was expecting at least 15,000-20,000 crores (INR 150 billion to INR 200 billion) this time," a dealer at a private sector bank said. As most of the volume was done before the auction in the call market and rates in the tri-party repo market were lower, the auction conducted earlier was poorly subscribed, dealers said. Some dealers said the auction was under subscribed, as it was for two days.  

The RBI took all INR 72 billion bids at the two-day VRR auction for INR 750 billion. The last two VRR auctions conducted by the RBI on Monday and Tuesday were subscribed around 50%, which dealers think is "good" subscription.  

Dealers expect the central bank to conduct more VRR auctions before the month-end inflows for salaries and pensions start next week as they expect liquidity to turn into a deficit. 

The RBI's net liquidity absorbed, which is a proxy for banking system liquidity surplus, was INR 92.89 billion Tuesday, sharply down from INR 695.96 billion on Monday due to outflows for GST payments and as banks increased their cash balances with the RBI, dealers said. Banks raised their cash balances with the RBI to INR 8.32 trillion Tuesday from INR 8.19 trillion Monday. The average daily cash reserve requirement for the fortnight ending Jul. 31 is INR 8.16 trillion.

Dealers expect the tri-party repo rate to remain at the current level and the weighted average rate is likely to be 5.27-5.28%, which is similar to Tuesday. They also expect the weighted average call rate to be around 5.35% by the end of Wednesday.  (Adithi Nemani and J. Navya Sruthi)

India Call: Up, near RBI's MSF rate on low liquidity amid GST outflows

MUMBAI – The one-day interbank call money rate was up, near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% Wednesday due to low liquidity surplus in the banking system, dealers said. The tri-party repo rate was near the policy rate of 5.25% as the RBI announced a two-day variable rate repo auction for INR 750 billion Wednesday, dealers said.  

"Most of the volume will be done in TREPS (tri-party repo market) as rate fell as VRR announcement," a dealer at a state-owned bank said. "I don't think there will be much subscription at the auction, could be around 20,000 crores (INR 200 billion) maximum," the dealer said.

The tri-party repo rate for one-day loans rose to 5.30% during the first half an hour as there was no scheduled VRR as most dealers had expected the RBI to conduct one due to low liquidity and higher overnight rates. However, after the announcement of the auction, borrowing rates in the tri-party repo market fell to 5.20% and remained around the repo rate.  

At 1017 IST, the tri-party repo rate for one-day loans was 5.26%, sharply higher than 4.98% Tuesday. The weighted average rate was 5.27%, up from 5.23% Tuesday. The volume in the tri-party market at the same time was INR 2.23 trillion, compared with INR 2.19 trillion at 1030 IST Tuesday. 

At 1016 IST, the one-day call rate was 5.45%, higher than 5.35% Tuesday. The weighted average call rate was 5.45%, up from 5.35% Tuesday. The volume at the same time was INR 68.28 billion, compared with INR 72.20 billion at 1030 IST Tuesday.

The RBI's net liquidity absorbed, which is a proxy for banking system liquidity surplus, was INR 92.89 billion Tuesday, sharply down from INR 695.96 billion on Monday due to outflows for GST payments and as banks increased their cash balances with the RBI, dealers said. Banks raised their cash balances with the RBI to INR 8.32 trillion Tuesday from INR 8.19 trillion Monday. The average daily cash reserve requirement for the fortnight ending Jul. 31 is INR 8.16 trillion. 

The median in an Informist poll showed an expectation of INR 400 billion at a cut-off rate of 5.26% at the two-day VRR auction for INR 750 billion between 1000 IST and 1030 IST. Estimates for total accepted bids at the auction were between INR 200 billion and INR 850 billion, according to the poll. While most dealers expect moderate subscription at the auction, a few dealers expect the auction to be oversubscribed.  

"Expecting an over subscription because liquidity is tight, rates are high," a dealer at another public sector bank said. The dealer expects the auction to be oversubscribed, with the RBI receiving at least INR 800 billion to INR 900 billion worth of bids. 

The central bank conducted a seven-day VRR auction for INR 1.25 trillion Monday, at which it took all INR 720.51 billion of bids and infused INR 342.91 billion through a two-day VRR auction Tuesday. Dealers expect the central bank to conduct more VRR auctions before the month-end inflows for salaries and pensions start next week as they expect the liquidity to turn into a deficit.  (J. Navya Sruthi)

End

US$1 = INR 96.5650

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

Edited by Deepshikha Bhardwaj

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