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Informist, Friday, Aug 2, 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 three-day call money rate ended at 6.10%, against 5.90% for the one-day call on Thursday.

The liquidity surplus in the banking system widened to 1.97 trln rupees on Thursday, the highest since Aug 10 last year, from 1.56 trln rupees on Wednesday, data from the RBI showed. During the day there were inflows of 200-300 bln rupees on account of government's month-end spending, dealers said. A total of 1.5-1.6 trln rupees was expected to come into the system in the form of government's month-end spending, dealers said.

The RBI today conducted a seven-day variable rate reverse repo operation for a notified amount of 1.5 trln rupees. At the auction, banks parked 598.60 bln rupees at a cut-off rate of 6.49%. There were four variable rate reverse repo tenders running concurrently, which reversed today. A total of 1.05 trln rupees came into the banking system on maturity.

Banks continued to maintain higher cash balances with the RBI amid surplus liquidity in the banking system. They maintained 10.16 trln rupees on Thursday, higher than the average daily cash reserve requirement of 9.81 trln rupees for the current fortnight ending Aug 9, according to the data. 

Starting next week, outflows on account of payment for excise duty and tax deducted at source are likely to begin, thereby limiting the liquidity surplus going forward. Regardless, the RBI is likely to continue conducting daily variable rate reverse repos, with maturities on the reporting Friday on Aug 9, dealers said.

The following are the other highlights:

* The weighted average call rate was 6.55%, against 6.47% on Thursday.

* The weighted average rate for triparty repo was 6.35%, as against 6.36% on Thursday.

* Reversal of the standing deposit facility added 819.30 bln rupees to the banking system, while reversal of the marginal standing facility drained 5.79 bln rupees. 

OUTLOOK

* On Saturday, the two-day call money rate may open below the RBI's repo rate of 6.50% because of low demand for funds from banks amid the liquidity surplus.

* As is usually the case on Saturdays, volume in the market is expected to be low.

* During the day, the call rate is seen in a range of 6.20-6.60%, dealers said.

CALL RATE

6.10%--Today's close for three-day loans

6.55%--Today's open for three-day loans

5.90%--Thursday'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 highest since Aug 10

MUMBAI – The interbank call money market rate was below the Reserve Bank of India's repo rate of 6.50% as the liquidity surplus widened further on account of the government's month-end spending, dealers said. The three-day call money rate was at 6.45% at 0940 IST, against 6.55% for one-day call on Thursday.

The liquidity surplus in the banking system widened to 1.97 trln rupees on Thursday, the highest since Aug 10, from 1.56 trln rupees on Wednesday, data from the RBI showed. In the last three days, there were inflows on account of the government's month-end spending, dealers said. Inflows of a total of 1.50-1.60 trln rupees are expected from the spending, they added.

There are four variable rate reverse repo tenders running concurrently, which will reverse today. A total of 1.05 trln rupees would be reversed for the same. On Thursday, the RBI said it would conduct a 7-day VRRR for a notified amount of 1.50 trln rupees, scheduled at 1030-1100 IST.

Banks continued to maintain higher cash balances with the RBI amid surplus liquidity in the banking system. They maintained 10.16 trln rupees on Thursday, higher than the average daily cash reserve requirement of 9.81 trln rupees for the current fortnight ending Aug 9, according to the data. 

The following are the other highlights:

* The weighted average call rate was 6.55%, against 6.47% on Thursday.

* The weighted average rate for triparty repo was 6.35%, as against 6.36% on Thursday.

* Reversal of the standing deposit facility added 819.30 bln rupees to the banking system, while reversal of the marginal standing facility drained 5.79 bln rupees. 

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

End

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

Edited by Ashish Shirke

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