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Informist, Wednesday, Jul 31, 2024

By M.C. Adhiinthran

MUMBAI – The interbank call money market rate ended at the Reserve Bank of India's repo rate of 6.50% due to firm demand for funds from banks at the end of trade, dealers said. This was despite the liquidity surplus in the banking system widening. The one-day call money rate ended at 6.50% against 5.75% on Tuesday.

The liquidity surplus in the banking system widened to 1.25 trln rupees on Tuesday from 1.14 trln rupees on Monday, data from the RBI showed. On Tuesday, there were inflows on account of government month-end spending, dealers said. So far, around 800 bln rupees has come into the system, out of the 1.25-1.50 trln rupees expected, they added.

Today, inflows on account of government's month-end spending took place, dealers said. Outflows of 295 bln rupees as payment for state government securities auctioned on Tuesday also took place. 

However, due to the prevailing liquidity surplus in the banking system, the central bank today conducted a 750-bln-rupee, two-day variable rate reverse repo auction. Banks parked 70.00 bln rupees at the tender at a cutoff rate of 6.49%.

The recent tender follows a four-day variable rate reverse repo tender on Monday, and a three-day tender on Tuesday. Banks parked 417.85 bln rupees in the former and 238.55 bln rupees in the latter. All the three tenders will reverse on Friday. 

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

As the system is flushed with liquidity, banks maintained higher cash balances with the central bank. They maintained 9.98 trln rupees on Tuesday, 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 6.49%, against 6.47% on Tuesday.

* The weighted average rate for triparty repo was 6.41%, as against 6.37% on Tuesday.

* Reversal of the standing deposit facility added 509.63 bln rupees to the banking system, while reversal of the marginal standing facility drained 4.68 bln rupees. 

OUTLOOK

* On Thursday, 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

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

6.55%--Today's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate as liquidity surplus widens

MUMBAI – The interbank call money market rate was below the Reserve Bank of India's repo rate of 6.50% due to surplus liquidity in the banking system, dealers said. The one-day call money rate was at 6.40% at 1003 IST, against 5.75% at close on Tuesday.

The liquidity surplus in the banking system widened to 1.25 trln rupees on Tuesday from 1.14 trln rupees on Monday, data from the RBI showed. On Tuesday, there were inflows on account of government month-end spending, dealers said. So far, around 800 bln rupees has come into the system, out of the 1.25-1.50 trln rupees expected, they added.

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 Tuesday, 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 6.47% on Tuesday.

* The weighted average rate for triparty repo was 6.39%, as against 6.37% on Tuesday.

* Reversal of the standing deposit facility added 509.63 bln rupees to the banking system, while reversal of the marginal standing facility drained 4.68 bln rupees. 

* The call rate is seen in a range of 6.20-6.70% during the day. (Nishat Anjum) 

End

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

Edited by Akul Nishant Akhoury

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