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Informist, Monday, Jul 29, 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 6.25% against 5.75% on Friday for three-day loans.

The liquidity surplus in the banking system widened to 1.45 trln rupees on Friday, its highest since Apr 5, data from the RBI showed. Dealers said inflows on account of government spending and redemption of the 8.40%, 2024 gilt worth 609.45 bln rupees widened the liquidity surplus in the banking system. 

With the liquidity surplus in the banking system widening further, the central bank today conducted a 1-trln-rupee four-day variable rate reverse repo auction. Banks parked 417.85 bln rupees at the tender at a cut-off rate of 6.49%.

"The RBI will continue to hold reverse repo auctions as liquidity will improve further this week due to month-end government spending," said a dealer with a private bank. 

With the system flush with liquidity, banks maintained higher cash balances with the central bank. They maintained 10.01 trln rupees on Sunday, which is higher than the average daily cash reserve requirement of 9.81 trln rupees for the current fortnight ending on Aug 9, 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%, unchanged from Friday

* The weighted average rate for triparty repo was 6.36% as compared to 6.39% on Friday.

* Reversal of the standing deposit facility added 1.08 trln rupees to the banking system, while reversal of the marginal standing facility drained 20.29 bln rupees.

OUTLOOK

* On Tuesday, 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

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

6.55%--Today's open for one-day loans

5.75%--Friday's close for three-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

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

MUMBAI – The interbank call money market rate was slightly above the Reserve Bank of India's repo rate of 6.50%, while the liquidity surplus in the banking system widened to the highest since Apr 5, dealers said. The one-day call money rate was at 6.55% at 0937 IST, against 5.75% at close on Friday for three-day loans.

The liquidity surplus in the banking system widened to 1.45 trln rupees on Friday from 859.21 bln rupees on Thursday, data from the RBI showed. Dealers said inflows on account of government spending and redemption of the 8.40%, 2024 gilt worth 609.45 bln rupees widened the liquidity surplus in the banking system. 

Most market participants expect the RBI to announce a shorter tenure variable rate reverse repo today to drain the excess liquidity in the banking system.

On Friday, the central bank conducted a 1.5-trln-rupee, 14-day variable rate reverse repo auction. However, banks parked only 234.20 bln rupees at the auction at a cut-off rate of 6.49%. 

Today, outflows of 350 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 6.48% on Friday.

* The weighted average rate for triparty repo was 6.39%, unchanged from Friday.

* Reversal of the standing deposit facility added 298.71 bln rupees to the banking system, while reversal of the marginal standing facility drained 19.37 bln rupees. 

* The call rate is seen in a range of 6.20-6.60% 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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