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Informist, Thursday, Jul 25, 2024

By Richard Fargose

MUMBAI - The interbank call money market rate ended sharply below the Reserve Bank of India's standing deposit facility rate of 6.25% as demand for funds eased towards the end, dealers said. The one-day call money rate ended at 5.75% against 6.67% on Wednesday. 

Market participants said the liquidity surplus in the banking system has widened because of inflows on account of government spending. The liquidity surplus widened slightly to 587.03 bln rupees on Wednesday, against 423.74 bln rupees on Tuesday, data from the RBI showed.

Dealers said tax refunds from the government also aided the banking system's liquidity. The liquidity surplus is expected to widen further on Friday due to scheduled redemption of 8.40%, 2024 gilt worth 609.45 bln rupees during the day.

Owing to improvement in the liquidity conditions, the weighted average call rate also eased to 6.56% from 6.67% on Wednesday.

Banks reduced their cash balances with the central bank, as they have already maintained the excess balance in the current fortnight so far. They maintained 9.85 trln rupees on Wednesday, which is lower than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight, according to the data. So far, in the current fortnight ending on Jul 26, banks have maintained an average cash reserve of 9.93 trln rupees.

The following are the other highlights:

* The weighted average call rate was 6.56% as against 6.67% on Wednesday.

* The weighted average rate for triparty repo was 6.45% as compared to 6.62% on Wednesday.

* Reversal of the standing deposit facility added 628.65 bln rupees to the banking system, while reversal of the marginal standing facility drained 34.01 bln rupees. 

OUTLOOK

* On Friday, the three-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.

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

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

CALL RATE

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

6.70%--Today's open for one-day loans

6.67%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate on demand for funds in early trade

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% due to strong demand for funds from banks in early trades, dealers said. The one-day call money rate was 6.60% as of 0930 IST, against 6.67% at close on Wednesday.

The liquidity surplus in the banking system has widened slightly to 587.03 bln rupees on Wednesday against 423.74 bln rupees on Tuesday, data from the RBI showed. Dealers said the liquidity surplus had widened because of inflows on account of government spending, dealers said. 

"Staggered spending from the government is happening and tax refund outflows also," said a dealer with big state-owned bank. "Liquidity is improving and will improve further tomorrow on gilt redemption."

The liquidity surplus is expected to widen on Friday due to scheduled redemption of 8.40%, 2024 gilt worth 609.45 bln rupees on Friday.

Banks reduced their cash balances with the central bank, as they have already maintained the excess balance in the current fortnight so far. They maintained 9.85 trln rupees on Wednesday, which is lower than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight, according to the data. So far, in the current fortnight ending on Jul 26, banks have maintained an average cash reserve of 9.93 trln rupees.

Following are the other highlights:

* The weighted average call rate was 6.66%, against 6.67% on Wednesday.

* The weighted average rate for triparty repo was 6.48%, against 6.62% on Wedneday.

* Reversal of the standing deposit facility added 628.65 bln rupees to the banking system, while reversal of the marginal standing facility drained 34.01 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 Manisha Baxla

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