India overnight rate breaks above ceiling of policy corridor as liquidity tightness persists

MUMBAI: Persistent tightness in India’s banking system liquidity has pushed the overnight call money rate above the ceiling of the monetary policy corridor for the first time in this financial year.

The interbank call money rate hit 5.65% on Tuesday, rising above the central bank’s Marginal Standing Facility rate of 5.50% for the first time in this fiscal year.

RBI’s repo rate stands at 5.25%, while the MSF rate acts as a ceiling of the monetary policy corridor.

Call rate had last risen above MSF rate on March 27, without considering the last trading day of FY, which generally sees volatile spikes in call rates.

Banking system liquidity remains in deficit mode for eight consecutive day through June 29, its longest streak of a shortfall in 2026.

Daily average liquidity surplus drops to 772 billion rupees ($8.15 billion), just 0.3% of deposits.

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Weighted average call rate (WACR) hit 5.50% on Tuesday, and has stayed above repo rate through this month.

RBI infusing funds through repos, but most of them have been under-subscribed, with many lenders relying on the uncollateralised borrowing window.

Earlier this month, RBI said it would ensure “appropriate liquidity” in the banking system — a departure from its earlier stance of ensuring “sufficient liquidity.”