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Informist, Thursday, Aug. 13, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Thursday and lower than Wednesday's close. There was little demand for funds towards the end of trade, though rates traded above the repo rate earlier in the day with the RBI's overnight variable rate reverse repo operations seeing robust participation despite active participation in initial public offerings this week, dealers said. The central bank is expected to continue conducting operations of overnight tenures to drain frictional liquidity, dealers said. 

"Molbio (Diagnostics) and Dhoot Transmission are two big IPOs this week is where money is going," a dealer at a state-owned bank said. Participation at the RBI's VRRRs have gained traction since the central bank has opted for an overnight tenure. The VRRRs conducted Wednesday and Thursday have seen average subscription of 76%, an improvement from 53% seen in the operations held earlier this month. Banks are not keen on lending in the tri-party repo market below 5.00%, dealers said. 

Credit growth is robust amid the surplus liquidity, dealers said. However, the pace of deposit growth has dropped, dealers said. Several banks have lowered their rupee-denominated term deposit rates, amid a focus on foreign currency non-resident (bank) deposits, dealers said. Mutual funds are likely to receive some inflows through systematic investment plans, dealers said.  

The one-day call money rate ended at 4.99% Thursday, lower than 5.12% for one-day loans Wednesday. The weighted average call rate was 5.21%, up from 5.11% the previous session. The volume in the market was INR 208.17 billion, higher than INR 168.33 billion in the previous session. The one-day tri-party repo rate ended at 4.95%, against 5.02% for one-day loans Wednesday. The weighted average rate was 5.09%, higher than 5.04% Wednesday. The volume in the TREPS market was INR 3.93 trillion, similar to INR 3.97 trillion the previous session.

OUTLOOK

On Friday, the three-day interbank call money rate is seen near the RBI's repo rate of 5.25% on demand from primary dealerships ahead of the gilt auction and due to reporting requirements for the fortnight ending Saturday, dealers said. The RBI will conduct a three-day VRRR for INR 1.50 trillion Friday, a day when two VRRRs totalling INR 1.23 trillion reverse. Traders will also borrow to provide for any obligations over the two-day weekend, with money markets shut on Saturday for Independence Day, despite it being a working Saturday. Traders have begun watching out for any drain in liquidity through currency in circulation, nearing the festive season. 

Liquidity continues to be ample amid inflows through foreign currency non-resident (bank) deposits, at least until outflows for goods and services tax begin in the latter half of the month, dealers said. Core systemic liquidity surplus could hit INR 9 trillion if inflows from FCNR(B) deposits continue to grow at a robust pace. Traders estimate inflows from these deposits to have hit about $45 billion as of this week from Jun. 8. Dealers expect the three-day call rate at 4.60–5.45% on Friday. The three-day tri-party repo rate is expected to be in the 4.60–5.30% band. The weighted average call rate is expected to be in the 5.05–5.20% band and the tri-party repo rate is likely to be 4.90-5.15%, dealers said.

CALL RATE

4.99%--Thursday close for one-day loans

5.25%--Thursday open for one-day loans

5.12%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's SDF rate; mkt sees VRRR Fri on reversal of 2 tenders

MUMBAI – The one-day interbank call money market rate was below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% after meeting regular funding needs earlier Thursday, dealers said. The tri-party repo rate ended below the lower end of the Liquidity Adjustment Facility corridor due to low demand for funds amid ample liquidity in the banking system, dealers said. 

However, during the day, the tri-party repo rate rose to 5.80%, the day's high, but dealers said this was an error trade. At 1045 IST, the tri-party repo rate for one-day loans was 5.80% and the volume of the trade was INR 5 billion. "It was a big figure error trade, should have been 4.80%," a dealer at a small finance bank said. "A mutual fund or a bank must have done it mistakenly...but there was no panic after it (trade)," the dealer said. 

On Thursday, the tri-party repo rate for one-day loans ended at 4.95%, against 5.02% at Wednesday's close. The weighted average rate was 5.09%, against 5.04% Wednesday. The volume in the tri-party repo market was INR 3.93 trillion, against INR 3.97 trillion Wednesday. The net liquidity absorbed by the RBI, a proxy for liquidity surplus, rose to INR 3.43 trillion Wednesday from INR 3.35 trillion Tuesday.

At 1618 IST, the one-day call rate was at 4.90%, down from 5.12% at Wednesday's close. The weighted average call rate was 5.21%, up from 5.11% Wednesday. The trade volume in the same contract was INR 167.13 billion, sharply up from INR 142.15 billion at 1630 IST Wednesday. Dealers said volumes rose as overnight rates were near the RBI's repo rate of 5.25% and banks were comfortable lending at the rate.   

Dealers also said there was not much impact of firm dollar-rupee swap rates on the overnight borrowing rates Thursday. The dollar-rupee forward premium in the cash spot market rose to a day's high of 2.42%, against the previous day's close at 1.20%. "Dollar-INR swap rate is very high, but IPO sizes are not very high for it to have an impact on overnight rates," the dealer at the private sector bank said.

Market participants expect the central bank to conduct a three-day variable rate reverse repo Friday as two tenders will be reversed Friday. Most dealers expect the RBI to conduct a VRRR auction for INR 1 trillion, while some also expect it to be for INR 1.5 trillion.

"It may not be more than 1 trillion as there will be demand for fortnight-end needs as well," a dealer at a private sector bank said. However, a dealer at a state-owned bank said the central bank may conduct an INR-1.5-trillion VRRR auction Friday due to the reversal of two tenders, as most banks have maintained excess cash balances with the RBI at the beginning of the fortnight. Friday, two VRRR tenders worth INR 1.23 trillion are scheduled for reversal.  (J. Navya Sruthi)

India Call: At RBI's repo rate on VRRR auction despite liquidity surplus

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships and continuous variable rate reverse repo auctions by the central bank, dealers said. The demand was slightly up Thursday also due to robust participation at the initial public offerings, and also as funds were locked up for the same, they said. However, its impact on the tri-party repo rate was minimal and stayed near the RBI's Standing Deposit Facility rate of 5.00%, the lower end of the Liquidity Adjustment Facility corridor.

According to an Informist Poll, total offers at the overnight, INR 1 trillion VRRR auction are likely to be between INR 550 billion and INR 750 billion, with a median estimate of INR 625 billion. All cut-off estimates were at the highest level of 5.24%, and the auction was between 0930 IST and 1000 IST.

"Call has reacted mostly because of VRRRs," a dealer at a state-owned bank said. "Not much IPO demand is seen now as all IPOs are done and funds are locked up. So that's why TREPs is still similar to yesterday's (Wednesday) level," the dealer said. 

At 0956 IST, the one-day call rate was at 5.25%, up from 5.12% at Wednesday's close. The weighted average call rate was 5.25%, up from 5.11% Wednesday. The trade volume in the same contract was INR 48.73 billion from INR 50.83 billion at 0930 IST Wednesday.

At 0956 IST, the tri-party repo rate for one-day loans was at 5.09%, against 5.02% at Wednesday's close. The weighted average rate was 5.07%, against 5.04% Wednesday. The volume in the same contract was INR 1.65 trillion, lower than INR 2.14 trillion at 1030 IST Wednesday.

Liquidity surplus inched up slightly as banks converted their dollar-denominated inflows from foreign currency non-resident (banks) deposits into rupee liquidity, which helped the liquidity surplus, dealers said. Although there have been robust flows of dollar deposits, the RBI's regular dollar sales in the spot market limited the rise in the systemic surplus, they said. The net liquidity absorbed by the RBI, a proxy for liquidity surplus, rose to INR 3.43 trillion Wednesday from INR 3.35 trillion Tuesday. (J. Navya Sruthi)

End

US$1 = INR 95.44

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

Edited by Avishek Dutta

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