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Informist, Monday, Jul 15, 2024

By Richard Fargose

MUMBAI – The inter-bank call money market rate ended below the Reserve Bank of India's standing deposit facility rate of 6.25% as the liquidity surplus in the banking system widened further, dealers said. The one-day call money rate ended at 5.75% against 6.55% on Friday for a three-day loan.

The liquidity surplus in the banking system widened to the highest since Apr 5 to 1.36 trln rupees on Friday from 1.30 trln rupees on Thursday, data from the RBI showed. Persistent inflows on account of government spending increased the liquidity surplus in the banking system, dealers said.

With the liquidity surplus in the banking system widening further, the central bank today conducted a 750-bln-rupee four-day variable rate reverse repo auction. Banks parked 372.20 bln rupees at the tender at a cut-off rate of 6.49%.

With the system flush with liquidity, banks maintained higher cash balances with the central bank. They maintained 10.01 trln rupees on Sunday as compared to 9.99 rupees on Saturday, which is higher than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight ending on Jul 26, according to the data. 

Usually, banks prefer to maintain higher cash balances with the central bank at the start of the reporting fortnight, which eases pressure on them to make up for it in the latter part. 

The following are the other highlights:

* The weighted average call rate was 6.47% against 6.46% on Friday.

* The weighted average rate for triparty repo was 6.34% as compared to 6.33% on Friday.

* Reversal of the standing deposit facility added 1.02 trln rupees to the banking system, while reversal of the marginal standing facility drained 31.59 bln rupees. 

OUTLOOK

* On Tuesday, the two-day call money rate may open near the RBI's repo rate of 6.50% because of the demand for funds from banks in early trades.

* Financial markets will be closed on Wednesday on account of Muharram.

* However, the rates may ease intraday owing to prevailing surplus liquidity in the banking system.

* During the day, the call rate is seen in a range of 6.20-6.75%, dealers said.

CALL RATE

5.75%--Today's close for one-day loans

6.55%--Today's open for one-day loans

6.55%--Friday's close for three-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI repo rate; liquidity surplus highest since Apr 5
 

MUMBAI – The interbank call money market rate was at the Reserve Bank of India's repo rate of 6.50%, while the liquidity surplus in the banking system was the highest since Apr 5, dealers said. The one-day call money rate was at 6.50% at 0927 IST, against 6.55% at close on Friday for three-day loans.

The liquidity surplus in the banking system widened further to 1.36 trln rupees on Friday from 1.30 trln rupees on Thursday, data from the RBI showed. Dealers said inflows on account of government spending widened the liquidity surplus in the banking system. 

Owing to the huge liquidity surplus in the banking system, most market participants expect the RBI to announce a shorter tenure variable rate reverse repo to drain excess funds. "25,000-50,000 crore (250-500 bln rupee) of shorter tenure reverse repo is expected today," a dealer with a private bank said.

On Friday, the central bank conducted a 1-trln-rupee, 14-day variable rate reverse repo auction. However, banks parked only 95.81 bln rupees at the auction at a cut-off rate of 6.49%. 

Today, outflows of 220 bln rupees will take place towards gilts auctioned on Friday. Other than that, no major inflows or outflows are expected today, dealers said. 

The following are the other highlights:

* The weighted average call rate was 6.55%, against 6.46% on Friday.

* The weighted average rate for triparty repo was 6.36%, as against 6.33% on Friday.

* Reversal of the standing deposit facility added 460.46 bln rupees to the banking system, while reversal of the marginal standing facility drained 28.39 bln rupees. 

* The call rate is seen in a range of 6.20-6.70% during the day. (Richard Fargose)

End

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

Edited by Saji George Titus

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