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Informist, Thursday, Aug 1, 2024

By Anupreksha Jain

MUMBAI – The interbank call money market ended below the Reserve Bank of India's repo rate of 6.50% as demand for funds from banks eased towards the end of the day, owing to a huge liquidity surplus in the banking system, dealers said. The one-day call money rate ended at 5.90% against 6.50% on Wednesday.

During the day, there were some inflows of around 200-300 bln rupees on account of the government's month-end spending, the same as the last two days, dealers said. Total inflows of 1.25-1.50 trln rupees are expected from the spending, they added. There were no major outflows that took place today.

The liquidity surplus in the banking system widened to 1.56 trln rupees on Wednesday, the highest since Apr 4, from 1.25 trln rupees on Tuesday, data from the RBI showed.

Today, the central bank conducted an overnight variable rate reverse repo operation for a notified amount of 750 bln rupees. At the auction, banks parked 328.31 bln rupees at a cut-off rate of 6.49%. The reversal of the same will take place on Friday.

In addition to today's auction, there are three variable rate reverse repo tenders reversing on Friday. A total of 726.40 bln rupees would be reversed through the three other tenders. Due to the prevailing liquidity conditions, the RBI after market hours today announced a seven-day, 1.5-trln-rupee reverse repo auction, which was widely expected by call market dealers.

Banks continued to maintain higher cash balances with the RBI amid surplus liquidity in the banking system. They maintained 10 trln rupees on Wednesday, 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 current reporting fortnight ends on Aug 9.

The following are the other highlights:

* The weighted average call rate was 6.47%, against 6.49% on Wednesday.

* The weighted average rate for triparty repo was 6.36%, as against 6.41% on Wednesday.

* Reversal of the standing deposit facility added 761.82 bln rupees to the banking system, while reversal of the marginal standing facility drained 28.91 bln rupees. 

OUTLOOK

* On Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% because of 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

5.90%--Today's close for one-day loans

6.55%--Today's open for one-day loans

6.50%--Tuesday'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 on firm demand in early trade

MUMBAI – The interbank call money market rate was slightly above the Reserve Bank of India's repo rate of 6.50% due to firm demand from banks in early trade, despite surplus liquidity in the banking system, dealers said. The one-day call money rate was at 6.55% at 0925 IST, against 6.50% at close on Wednesday.

The liquidity surplus in the banking system widened to 1.56 trln rupees on Tuesday, the highest since Apr 4, from 1.25 trln rupees on Monday, data from the RBI showed. In the last two days, there were inflows on account of government month-end spending, dealers said. Inflows of a total of 1.25-1.50 trln rupees are expected from the spending, they added.

There are three variable rate reverse repo tenders running concurrently, which will reverse on Friday. A total of 726.40 bln rupees would be reversed for the same. Due to the prevailing liquidity conditions, the market expects the central bank to announce an overnight variable rate reverse repo auction, dealers said.

Banks continued to maintain higher cash balances with the RBI amid surplus liquidity in the banking system. They maintained 10 trln rupees on Wednesday, 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 6.49% on Wednesday.

* The weighted average rate for triparty repo was 6.39%, as against 6.41% on Wednesday.

* Reversal of the standing deposit facility added 761.82 bln rupees to the banking system, while reversal of the marginal standing facility drained 28.91 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 Vidhi Verma

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