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Informist, Tuesday, Jul 16, 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 demand for funds eased towards the end of the day, dealers said. The two-day call money rate ended at 5.75%, unchanged from Monday for one-day loans. Indian financial markets will be closed on Wednesday on account of Muharram.

The liquidity surplus in the banking system narrowed to 828.75 bln rupees on Monday from 938.71 bln rupees on Sunday, data from the RBI showed. The surplus narrowed due to outflows of 220 bln rupees on Monday towards gilts auctioned on Friday, dealers said.

Due to the prevailing liquidity surplus in the banking system, the central bank today conducted a 250-bln-rupee, three-day variable rate reverse repo auction. Banks parked 250.09 bln rupees at the tender at a cut-off rate of 6.49%.

On Monday, the central bank conducted a 750-bln-rupee four-day variable rate reverse repo auction, and banks parked 372.20 bln rupees. Both tenders will reverse on Friday.

With the liquidity in the banking system remaining in surplus, banks maintained higher cash balances with the central bank. As per RBI's norms, banks need to maintain an average cash balance with the central bank on a fortnightly basis to meet the cash reserve ratio requirement. Banks maintained 9.98 trln rupees on Monday, higher than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight ending 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 6.48% against 6.47% on Monday.

* The weighted average rate for triparty repo was 6.38% as compared to 6.34% on Monday.

* Reversal of the standing deposit facility added 521.29 bln rupees to the banking system, while reversal of the marginal standing facility drained 18.54 bln rupees.

OUTLOOK

* On Thursday, the one-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.

* 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 two-day loans

6.50%--Today's open for two-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Slightly above repo rate as liquidity surplus narrows

MUMBAI – The interbank call money market rate was above the Reserve Bank of India's repo rate of 6.50% due to demand for funds from banks in early trade, dealers said. The two-day call money rate was at 6.55% at 0920 IST, against 5.75% at close on Monday for one-day loans.

Indian financial markets will be closed on Wednesday on account of Muharram.

The liquidity surplus in the banking system narrowed to 828.75 bln rupees on Monday from 938.71 bln rupees on Sunday, data from the RBI showed. The surplus narrowed due to outflows of 220 bln rupees on Monday towards gilts auctioned on Friday. 

Market participants said that due to the prevailing liquidity surplus in the banking system, the RBI might announce a shorter tenure variable rate reverse repo today.

On Monday, the central bank 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 9.98 trln rupees on Monday, higher than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight ending 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 6.55%, against 6.47% on Monday.

* The weighted average rate for triparty repo was 6.38%, as against 6.34% on Monday.

* Reversal of the standing deposit facility added 521.29 bln rupees to the banking system, while reversal of the marginal standing facility drained 18.54 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 Tanima Banerjee

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