Private sector banks experienced a significant reduction in their participation in India's overnight money market during the first half of fiscal year 2026-27. According to the Reserve Bank of India's monetary policy report released on October 7, private lenders' share in tri-party repo borrowing fell to 14% during April-September 2026, down from 24% in the preceding six-month period. This represents a substantial decline in private banks' reliance on this funding mechanism during the current fiscal year.
In contrast to private banks' decline, public sector banks demonstrated increased activity in the collateralised overnight money market. As reported by The Economic Times, public sector banks' contribution to the collateralised overnight money market increased to 35% during the first half of fiscal from 32% in the previous six months. This expansion reflects their growing participation in the overnight funding mechanisms available to banks.
Mutual funds continued to hold significant positions across both repo segments despite some shifts in their participation patterns. According to the RBI data, mutual funds retained their position as the largest lenders in the tri-party repo market, accounting for 65% of lending during the first half of fiscal. However, their dominance in the market repo segment weakened, with their share of total lending dropping to 41% in the first half of 2026-27 from 48% in the previous six months. Foreign banks moved in the opposite direction, raising their contribution to market repo lending to 31% during April-September from 29% in the preceding half-year period.
The overnight money market composition remained largely unchanged with collateralised instruments continuing to dominate funding mechanisms. As reported by The Economic Times, tri-party repo and market repo together made up 97% of the total overnight money market volume during the first half of 2026-27, while the uncollateralised call money market accounted for the remaining 3%. The borrowing pattern among public sector banks also changed in the market repo segment, with their share rising by 5 percentage points to 13% during the first half of 2026-27. Overall, the data indicates that while participation patterns shifted across different bank groups and financial institutions, collateralised instruments continued to dominate overnight funding arrangements.
