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Informist, Monday, Oct. 5, 2026

 

By Janwee Prajapati

 

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% on Monday amid weak demand for funds from banks on the first day of the week after an extended weekend, dealers said. Traders were also cautious ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome due Wednesday, dealers said. Trade volume in the call money market was subdued Monday amid weak demand for funds, dealers said.

 

"TREP rates were on the lower side, tracking which call rates also came down," a dealer at a public sector bank said. "Rates were lower mostly because of the existing ample liquidity in the market... there are not many outflows lined up." 

 

The one-day call rate ended at 4.80%, down from 5.10% at the open and similar to 4.85% at the close for two-day loans Saturday. The weighted average call rate was 5.09%, up from 4.94% Saturday, but near the RBI's SDF rate. The volume in the one-day call money contract was INR 128.96 billion, up from INR 18.33 billion Saturday. Trade volumes are usually lower on Saturdays.

 

The one-day tri-party repo rate ended at 5.00% Monday, from 5.05% at the open and 5.00% at the close Saturday for two-day loans. The weighted average rate was at 5.08%, up from 4.87% Saturday. Volume in the one-day contract was INR 5.26 trillion, higher than INR 188.56 billion Saturday.

 

High liquidity surplus in the banking system kept money market rates in check, dealers said. The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – was similar to INR 5.16 trillion on Sunday, little changed from INR 5.17 trillion on Saturday.

 

Given the surplus liquidity in the banking system, traders expect the central bank to continue its variable rate reverse repo auctions to absorb excess liquidity, dealers said. Traders expect such auctions to have tenures ranging from overnight to seven days. "I think the VRRR auction will continue," a dealer at a private sector bank said. "If you observe, net durable liquidity has been higher. It is something that the RBI will try to take hold of."

 

Traders expect rates to rise on Tuesday ahead of the RBI's MPC outcome on Wednesday, dealers said. At the policy meeting, traders largely expect a 25-basis-point hike in the repo rate, with the stance remaining unchanged at neutral. Traders will closely track RBI Governor Sanjay Malhotra's comments on forward guidance, dealers said. Traders also expect call rates to rise as excise duty collections are likely to go out of the system by Wednesday. Some traders expect the amount to be around INR 350 billion-INR 500 billion, which is likely to push up call rates, dealers said.

 

OUTLOOK

Tuesday, the two-day call money rate is expected to hover near the RBI's repo rate of 5.25%, depending on demand for funds from banks and primary dealers, dealers said. Outflows due to excise duty are likely to keep call rates higher, dealers said. However, the remaining inflows from the foreign currency non-resident deposits with banks are likely to cap the upside in rates, dealers said.

 

Government spending is also likely to infuse more liquidity into the banking system over the next few sessions, which may drag overnight money market rates, dealers said. Later in the month, goods and services tax collection will also push rates up, dealers said. Moreover, some traders expect the central bank to continue variable rate reverse repo auctions to limit the downside in rates. 

 

Post-market hours Monday, the RBI announced an overnight VRRR auction for INR 2.50 trillion to be conducted from 0930 IST to 1000 IST. Reversal will take place on Wednesday. No outflows are scheduled for Tuesday. Dealers expect the one-day call rate to be at 5.10–5.25% on Tuesday, while the two-day tri-party repo rate is seen at 5.15-5.25%.

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India Ltd.:

 

TENURE	MONDAY	THURSDAY
Overnight	5.13	5.10
3-day	--	--
14-day	5.72	5.75
1-month	5.92	5.92
3-month	6.34	6.35

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India Call: Below RBI SDF rate as demand for funds eases; TREPs end at SDF

 

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as demand for funds eased, dealers said. The tri-party repo rate ended at the floor rate after rising to an intraday high of 5.25% as the first variable rate reverse repo auction was oversubscribed, dealers said. 

 

"There must have been extra borrowing in the early trade, so we saw oversubscription at auction," a dealer at a small-finance bank said. Overnight borrowing rates rose to 5.25?ter the result of the overnight INR-2.00-trillion VRRR auction. The RBI received INR 2.11 trillion offers at the VRRR auction and accepted INR 2.00 trillion offers at the first overnight VRRR auction. The RBI conducted another overnight VRRR auction for INR 500 billion on Monday and took all INR 101.42 billion offers.  

 

At 1722 IST, the one-day call rate was at 4.85%, unchanged from Saturday's close for two-day loans. The weighted average call rate fell to 5.09%, up from 4.94% Saturday. Contract volume was INR 128.45 billion, up from INR 18.33 billion for two-day loans at 1730 IST Saturday.

 

The tri-party repo rate ended at 5.00%, unchanged from the previous close for two-day loans. The weighted average rate was 5.08%, up from 4.87% Saturday. Trade volume in the contract was INR 5.26 trillion, up from INR 188.56 billion Saturday. Trade volumes are usually lower on Saturday.  

 

The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – was at INR 5.16 trillion on Sunday, against INR 5.17 trillion on Saturday and INR 4.45 trillion on Friday. The liquidity surplus rose due to month-end inflows from salaries and pensions, and as banks also withdrew excess cash balances from the RBI. Cash balances with the central bank as on Sunday fell to INR 8.52 trillion Sunday from INR 9.15 trillion Friday.

 

Dealers do not expect the overnight borrowing rates to rise over 5.25%, the policy rate, due to ample liquidity in the banking system. Market participants remain cautious ahead of the RBI's Monetary Policy Committee's decision, due Wednesday.  (J. Navya Sruthi)

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India Call: Near RBI's SDF rate on PDs' borrowing, ample liquidity surplus

 

MUMBAI – The one-day interbank call money rate Monday was near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to early demand for funds from primary dealerships amid ample liquidity surplus in the banking system, dealers said. The tri-party repo rate was also near the floor rate due to lack of major outflows Monday. Market participants remain cautious ahead of the RBI's Monetary Policy Committee's decision, due Wednesday. 

 

At 1000 IST, the one-day call rate was at 5.05%, up from 4.85% for two-day loans Saturday. The weighted average call rate was 5.10%, up from 4.94% Saturday. The volume in the same contract was INR 3.36 billion, against INR 500 million for two-day loans at the same time Saturday. The tri-party repo rate was at 5.08%, up from 5.00% for two-day loans Saturday. The weighted average rate was 5.07%, up from 4.87% Saturday. Trade volume in the same contract was INR 2.03 trillion, up from INR 30 billion Saturday. Trade volumes are usually lower on Saturday.  

 

The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was at INR 4.38 trillion Thursday, down from INR 4.87 trillion Wednesday as banks increased their cash balances with the RBI. Cash balances with the central bank as on Thursday rose to INR 9.23 trillion Thursday from INR 8.02 trillion Wednesday.

 

Most market participants expect around 75% subscription at the RBI's overnight, INR-2.00-trillion variable rate reverse repo auction conducted between 0930 IST and 1000 IST Monday due to ample liquidity in the banking system. However, some expect it to be only around 50%, anticipating a rise in overnight borrowing rates later Monday, amid expectations of a 25-basis-point hike in interest rates on Wednesday by the RBI's MPC. 

 

"Banks are cautious now because they are expecting RBI to hike the rate by 25 bps in MPC," a dealer at a state-owned bank said. "That's why they are also not putting money in VRRR. They are maintaining cash for credit disbursements for this quarter," the dealer said. 

 

According to an Informist poll, market participants expect total offers between INR 1.00 trillion and INR 1.80 trillion at the auction, with a median estimate of INR 1.50 trillion. All cut-off estimates were at the highest level of 5.24%. At the four-day, INR-2.00-trillion VRRR Thursday, the RBI accepted all INR-1.68-trillion offers, which were reversed earlier Monday. 

 

Dealers expect the RBI to continue with overnight VRRR auctions till Wednesday. Some dealers suggest that there should be a longer-term VRRR auction due to a lack of major outflows, but the central bank is unlikely to conduct one due to lack of participation at such auctions due to anticipation of a rate hike in the policy.  (J. Navya Sruthi)

 

End

 

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

 

Edited by Saji George Titus

 

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