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Informist, Tuesday, Jul 30, 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 one-day call money rate ended at 5.75% against 6.25% on Monday.

The liquidity surplus in the banking system narrowed to 1.14 trln rupees on Monday from 1.45 trln rupees on Friday, data from the RBI showed. The surplus narrowed due to outflows of 350 bln rupees on Monday towards gilts auctioned on Friday.

However, due to the prevailing liquidity surplus in the banking system, the central bank today conducted a 750-bln-rupee, three-day variable rate reverse repo auction. Banks parked 238.55 bln rupees at the tender at a cutoff rate of 6.49%.

On Monday, the central bank conducted a 1-trln-rupee four-day variable rate reverse repo auction, and banks parked 417.85 bln rupees at the tender. The reversal of both auctions will take place on Friday.

Market participants expect liquidity in the banking system to improve further this week due to month-end government spending in the form of salary and pension payments. 

With the banking system liquidity remaining in huge surplus, 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 9.81 trln rupees for the current fortnight ending 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 6.47% as against 6.48% on Monday.

* The weighted average rate for triparty repo was 6.37% as compared to 6.36% on Monday.

* Reversal of the standing deposit facility added 639.19 bln rupees to the banking system, while reversal of the marginal standing facility drained 7.16 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.

* 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 one-day loans

6.55%--Today's open for one-day loans

6.25%--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 one-day call money rate was at 6.55% at 0920 IST, against 6.25% at close on Monday.

The liquidity surplus in the banking system narrowed to 1.14 trln rupees on Monday from 1.45 trln rupees on Friday, data from the RBI showed. The surplus narrowed due to outflows of 350 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.

"TREPS (triparty repos) rate is around 6.37%, so they (RBI) will announce a reverse repo as they are aiming to keep rates around repo rate," said a dealer with a private bank.

Market participants expect liquidity in the banking system to improve further this week due to month-end government spending in the form of salary and pension payments.  

On Monday, the central bank 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%.

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 9.81 trln rupees for the current fortnight ending 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 6.55%, against 6.48% on Monday.

* The weighted average rate for triparty repo was 6.37%, as against 6.36% on Monday.

* Reversal of the standing deposit facility added 639.19 bln rupees to the banking system, while reversal of the marginal standing facility drained 7.16 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 Aditya Sakorkar

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