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Informist, Tuesday, Jul 23, 2024

By Richard Fargose

MUMBAI - The interbank call money market rate ended at the Reserve Bank of India's repo rate of 6.50% as demand for funds remained firm amid a sharp fall in liquidity surplus in the banking system, dealers said. The one-day call money rate ended at 6.50% against 6.55% on Monday. 

The liquidity surplus in the banking system narrowed sharply to 387.57 bln rupees on Monday due to goods and services tax payment outflows over the weekend, dealers said. Last week, the liquidity surplus had widened to a three-month high of 1.39 trln rupees because of inflows on account of government spending, dealers said.

Owing to the sharp narrowing of the surplus and strong demand for funds, the weighted average call rate stood higher at 6.67% today, as against 6.60% on Monday.

"We were expecting VRR (variable rate repo) auction today as overnight borrowing rates were hovering around 6.75%," a dealer with a state-owned bank said. 

Banks reduced their cash balances with the central bank on Monday. They maintained 9.71 trln rupees on Monday, which is lower than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight, according to the data. However, so far, in the current fortnight ending on Jul 26, banks have maintained an average cash reserve of 9.93 trln rupees.

Despite the narrowing of the liquidity surplus and the elevated interbank borrowing rate, the RBI today announced a two-day variable rate reverse repo auction for a notified amount of 500 bln rupees on Wednesday.

"The reverse repo announcement for tomorrow is a complete surprise for us. The notified amount is higher than the surplus liquidity available in the system," another dealer with a state-owned bank said.

The following are the other highlights:

* The weighted average call rate was 6.67% against 6.60% on Monday.

* The weighted average rate for triparty repo was 6.67% as compared to 6.59% on Monday.

* Reversal of the standing deposit facility added 479.23 bln rupees to the banking system, while reversal of the marginal standing facility drained 45.45 bln rupees.

OUTLOOK

* On Wednesday, 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 trade.

* During the day, the call rate is seen in a range of 6.20-6.80%, dealers said.

CALL RATE

6.50%--Today's close for one-day loans

6.75%--Today's open for one-day loans

6.55%--Monday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At MSF rate; liquidity surplus sharply dn on GST outflows

MUMBAI – The interbank call money rate was at the Reserve Bank of India's Marginal Standing Facility rate of 6.75% due to strong demand for funds from banks as the liquidity surplus narrowed sharply due to Goods and Services Tax payments outflows, dealers said. The one-day call money rate was 6.75% as of 0930 IST, against 6.55% at close on Monday.

The liquidity surplus in the banking system narrowed to 387.57 bln rupees on Monday from 734.45 bln rupees on Sunday, data from the RBI showed. Last week, the liquidity surplus had widened to a three-month high of 1.39 trln rupees because of inflows on account of government spending, dealers said. 

Banks reduced their cash balances with the central bank on Monday. They maintained 9.71 trln rupees on Monday, which is lower than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight, according to the data. However, so far, in the current fortnight ending on Jul 26, banks have maintained an average cash reserve of 9.93 trln rupees.

Most dealers expect the RBI to continue managing liquidity in the banking system by conducting fine-tuning repo-reverse repo operations. 

"RBI may announce 50,000-75,000 crore (500-750 bln-rupee) VRR (variable rate repo) auction today as rates are near MSF," said a dealer with a private bank. 

Following are the other highlights:

* The weighted average call rate was 6.78%, against 6.60% on Monday.

* The weighted average rate for triparty repo was 6.66%, against 6.59% on Monday.

* Reversal of the standing deposit facility added 479.23 bln rupees to the banking system, while reversal of the marginal standing facility drained 45.45 bln rupees. 

* The call rate is seen in a range of 6.20-6.80% during the day. (Richard Fargose)

End

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

Edited by Vidhi Verma

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