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Informist, Thursday, Sept. 3, 2026

 

--India's 1-day tri-party repo rate ends at 3.75%, lowest since Aug 5, 2022 

 

By Cassandra Carvalho

 

MUMBAI – The one-day call money rate ended Thursday near the Reserve Bank of India's Standing Deposit Facility rate in a system flush with liquidity as inflows through the central bank's concessional swap window for foreign currency non-resident (banks) deposits exceeded expectations, dealers said. The one-day tri-party repo rate ended at its lowest level since Aug. 5, 2022, with mutual funds deploying funds aggressively amid lack of other avenues for lending, they said. With the systemic liquidity surplus expected to hit INR 12 trillion by the end of the week, traders' attention is also on measures the central bank could introduce to drain systemic liquidity, with several traders expecting the RBI to announce one such set of measures Friday, they said. 

 

Volumes in the call money market dropped while those in the tri-party repo market rose, compared to recent sessions, with borrowers preferring the low rates in the latter, dealers said. Excise duty outflows of about INR 400 billion are scheduled by Monday, dealers said, barring which there is no major outflow and only further inflows expected until next week, dealers said. The slide in overnight borrowing rates Thursday is despite the central bank conducting two overnight variable rate reverse repo operations and taking offers totalling INR 5.54 trillion. "VRRR has not been effective enough, rates have fallen to the lowest in many years," a dealer at a state-owned bank said. 

 

The RBI's net liquidity absorption -- an indication of the banking system liquidity surplus -- rose to INR 9.70 trillion Wednesday from INR 7.76 trillion Tuesday, according to latest data. This was the highest liquidity surplus since the RBI began keeping records of the metric in January 2019. The one-day call rate ended at 5.05% from 4.70% at Wednesday's close and 4.75% at Thursday's open. The weighted average call rate was 4.95%, dropping further from 5.02% Wednesday. The trade volume in the contract was INR 61.30 billion from INR 106.78 billion Wednesday.

 

The one-day tri-party repo rate ended at 3.75% Thursday, down from 4.79% at the open and 4.07% at Wednesday's close. The weighted average rate was 4.45%, down from 4.68% Wednesday. The volume in the contract was INR 5.06 trillion, against INR 4.92 trillion Wednesday.

 

OUTLOOK

Friday, the three-day call rate is expected to open below the RBI's repo rate of 5.25% and near the SDF rate as liquidity surplus in the banking system is seen rising further overnight, dealers said. As has been seen the past week, the call money market rate is likely to open much later in the session, with primary dealers likely to resort to borrowing funds from the repo and tri-party repo markets. The RBI after market hours said it will conduct a three-day VRRR for INR 7 trillion Friday, which is likely to see moderate subscription, dealers said.

 

Dealers expect the RBI to Friday announce measures to drain durable liquidity from the banking system, with most traders expecting incremental hikes in the cash reserve ratio to take it to 4%, from the current 3%, which is historically low. Raising the CRR to 4% over time would lock up about INR 2.75 trillion of systemic liquidity, dealers said. Outflows for advance tax and goods and services tax this month will drain about INR 5 trillion.

 

By the RBI's next policy meeting in October, core systemic liquidity could top INR 10 trillion, dealers said. The RBI could announce a combination of measures Friday, or in a phased manner, including sale of government bonds through open market operations, a dollar-rupee sell-buy swap, or a market stabilisation scheme. Some traders also expect measures such as a long-term VRRR with the option of premature redemption.

 

Dealers expect the three-day call rate at 4.60–5.20% Friday. The three-day tri-party repo rate is expected to be in the 4.50–5.10?nd. The weighted average rate in the call market is seen in the 4.90–5.10?nd, and the tri-party repo rate is likely to be 4.50-5.00%, dealers said.

 

CALL RATE

5.05%--Thursday close for one-day loans

4.75%--Thursday open for one-day loans

4.70%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.01	5.08
3-day	--	--
14-day	5.70	5.79
1-month	5.98	6.02
3-month	6.51	6.55

 

---

India Call: Not traded; TREPS near 4.50% on likely record liquidity surplus

 

NEW DELHI – There were no trades in the call money market as of 1014 IST. The tri-party repo rate was near 4.50%, well below the Reserve Bank of India's Liquidity Adjustment Facility Corridor with the Standing Deposit Facility rate of 5.00% at its base. There was lack of demand for funds from banks as the RBI's net liquidity absorption--a proxy for the banking system liquidity surplus--jumped nearly INR 2 trillion overnight to INR 9.70 trillion on Wednesday, dealers said. This is the highest level of liquidity surplus since the RBI started compiling the data in January 2019. 

 

"There was only around INR 7 trillion surplus during demonetisation (in 2016)," a dealer at a state-owned bank said. "So if this is higher than the post-COVID figures then this is probably a record high, and it will go up further to INR 12 trillion in the coming days."

 

The one-day tri-party repo rate was 4.52% at 1014 IST, down from 4.79% at the open but up from 4.07% Wednesday. The weighted average rate was 4.55%, down from 4.68% Wednesday. The volume in the overnight contract was INR 2.38 trillion, down from INR 2.72 trillion at 1030 IST Wednesday.

 

The sharp rise is liquidity was largely due to the settlement of foreign currency non-resident (banks) deposits at the RBI's swap window, dealers said. The window to mobilise deposits ended Monday and would have been swapped with the RBI on Monday and Tuesday. Consequently, Wednesday and Thursday's liquidity data was expected to show a huge jump in the rupee liquidity with banks, dealers said. Wednesday, the RBI said banks raised $127.23 billion through FCNR(B) deposits despite its early closure, sharply above the expectation of most market participants. Only some traders had expected inflows to top $100 billion comfortably.

 

With cash in hand rising, banks offered INR 5.19 trillion at the overnight, INR-6.00-trillion variable rate reverse repo tender at 0930-1000 IST, all of which the RBI accepted at the highest cut-off rate of 5.24%. Some dealers expected the RBI to conduct another overnight VRRR auction on the demand of banks, which were still assessing their daily liquidity requirements when the first auction was held at 0930-1000 IST and did not tender the full amount. 

 

"With this level of liquidity, it is inevitable that the RBI will do something to absorb durable liquidity," a dealer at a private-sector bank said. "VRRRs alone will not be enough to hold your call rate anywhere near the repo rate if the core liquidity surplus (including government cash balances) is at INR 11 trillion." 

 

Primary dealers, who are typically the largest borrowers early in the day, were meeting their cash needs by borrowing in the collateralised markets, dealers said. Clearing Corp. of India data at 0959 IST showed a quote at a borrow rate of 5.05%, with no offers to lend. At 1014 IST, there were two quotes to lend, at 5.10% and 5.25%, while the quote to borrow had been removed. (Cassandra Carvalho)

 

End

 

US$1 = INR 94.4850

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

 

Edited by Rajeev Pai

 

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