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Informist, Friday, Jul 19, 2024

By Richard Fargose

MUMBAI – The inter-bank call money market rate ended below the Reserve Bank of India's repo rate of 6.50% as demand for funds eased towards the end as the liquidity surplus in the banking system was the highest since Apr 5, dealers said. The three-day call money rate ended at 6.25% against 5.75% on Thursday for one-day loans. 

Dealers said persistent inflows on account of government spending this month have widened the liquidity surplus in the banking system. As government spending was muted in the previous three-four months on account of the General Election, spending has been stepped up ahead of the Budget. The full Budget for 2024-25 (Apr-Mar) is scheduled to be presented on Tuesday.

The liquidity surplus in the banking system widened to 1.39 trln rupees on Thursday from 1.15 trln rupees on Wednesday, data from the RBI showed.

Dealers said most banks avoided parking funds at the reverse repo window as they maintained higher funds to meet goods and service tax payments, scheduled over the weekend.

"When you have a working Saturday and GST payments lined-up over the weekend, of course banks will hold cash with them," said a dealer with a state-owned bank.

The central bank today conducted a three-day variable rate reverse repo auction for a notified amount of 500 bln rupees, and banks parked 337.50 bln rupees at the tender. Earlier this week, the central bank drained a total of 1.08 trln rupees through four variable rate reverse repo auctions. All these tenders were reversed today.

The following are the other highlights:

* The weighted average call rate was 6.53% against 6.47% on Thursday.

* The weighted average rate for triparty repo was 6.47% as compared to 6.40% on Thursday.

* Reversal of the standing deposit facility added 434.65 bln rupees to the banking system, while reversal of the marginal standing facility drained 79.27 bln rupees.

OUTLOOK

* On Saturday, the two-day call money rate may open below the RBI's repo rate of 6.50% because of low demand for funds from banks amid a liquidity surplus.

* As is usually the case on Saturdays, volume in the market is expected to be low. 

* During the day, the call rate is seen in a range of 6.20-6.70%, dealers said.

CALL RATE

6.25%--Today's close for three-day loans

6.55%--Today's open for three-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI repo rate; liquidity surplus widens further

MUMBAI – The interbank call money market rate was above 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 three-day call money rate was 6.55% as of 0930 IST, against 5.75% at close on Thursday for one-day loans. 

The liquidity surplus in the banking system widened to 1.39 trln rupees on Thursday from 1.15 trln rupees on Wednesday, data from the RBI showed.

Inflows on account of government spending widened the liquidity surplus in the banking system, dealers said. As government spending was muted in the previous three-four months on account of the General Elections, spending has been stepped up ahead of the Budget. The full Budget for 2024-25 (Apr-Mar) is scheduled to be presented on Tuesday.

Today, the central bank will conduct a three-day variable rate reverse repo auction for a notified amount of 500 bln rupees between 1030 and 1100 IST. Earlier this week, the central bank drained a total of 1.08 trln rupees through four variable rate reverse repo auctions. All these tenders will reverse today.

Dealers said banks are likely to maintain higher funds as goods and service tax payments are scheduled over the weekend.

"Reverse repo maturity amount is over 1 trln rupee, but banks may not park a significant amount today due to GST outflows," said a dealer with a private bank. 

Following are the other highlights:

* The weighted average call rate was 6.59%, against 6.47% on Thursday.

* The weighted average rate for triparty repo was 6.48%, against 6.40% on Thursday.

* Reversal of the standing deposit facility added 434.65 bln rupees to the banking system, while reversal of the marginal standing facility drained 79.27 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 Deepshikha Bhardwaj

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