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Informist, Wednesday, Aug 7, 2024

By Richard Fargose

MUMBAI – The interbank call money market ended at the Reserve Bank of India's standing deposit facility rate of 6.25% as demand for funds from banks eased with the liquidity remaining in huge surplus, dealers said. The one-day call money rate ended at 6.25% as against 5.75% on Tuesday.

The liquidity surplus in the banking system was 2.79 trln rupees on Tuesday against 2.86 trln rupees on Monday, data from the RBI showed. The liquidity surplus on Monday was the highest since Jul 6, 2022. Last week, inflows of around 1.60 trln rupees on account of the government's month-end spending boosted the liquidity in the banking system, dealers said.

"Although there were the excise and TDS payment outflows, the system is still flush with ample liquidity," said a dealer with a state-owned bank. Dealers estimate outflows of around 500-600 bln rupees on account of excise and tax-deducted-at-source payments today.

Owing to surplus liquidity, the call money rate hovered below the repo for most part of the session today. However, between 1430 IST and 1530 IST, the call money market witnessed a sharp surge in rates, with the call money rate touching 6.75% due to late session borrowing by some banks.     

"Most of the volume is usually covered by 2 o'clock (1400 IST), and today it looked like some bankers had fund demand after that," said a dealer with a state-owned bank.

Banks maintained higher-than-required cash balances with the RBI last week, and so far, they have maintained an average of 9.90 trln rupees for the current fortnight ending Friday, higher than the average daily cash reserve requirement of 9.81 trln rupees for the current fortnight, which means there was lower demand for funds to meet reserve requirements today.

Banks maintained cash balances worth 9.64 trln rupees with the RBI on Tuesday.

Dealers said the RBI avoided conducting a variable rate reverse repo auction today amid outflows for excise and tax-deducted-at-source payments.

On Tuesday, the RBI conducted two variable rate reverse repo operations for a total amount of 1.25 trln rupees. At the first auction, which was a three-day operation with a notified amount of 750 bln rupees, banks parked 238.03 bln rupees. At the second overnight reverse repo auction, banks parked 199.54 bln rupees against the total notified amount of 500 bln rupees.

Including Tuesday's auction, there are a total of four variable rate reverse repo tenders worth 1.86 trln rupees outstanding, which will be reversed on Friday.

The following are the other highlights:

* The weighted average call rate was 6.48%, against 6.41% on Tuesday.

* The weighted average rate for triparty repo was 6.36%, against 6.24% on Tuesday.

* Reversal of the standing deposit facility added 898.57 bln rupees to the banking system, while reversal of the marginal standing facility drained 42.17 bln rupees. 

OUTLOOK

* On Thursday, the one-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 6.00-6.60%, dealers said.

CALL RATE

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

6.50%--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: At repo rate; RBI may announce reverse repo auction
 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% today due to demand for funds from some banks in early trades, dealers said. The one-day call money rate was at 6.50% at 0930 IST, against 5.75% at close on Tuesday.

However, the interbank call money rate is likely to ease as liquidity remains in huge surplus on account of the government's month-end spending.

The liquidity surplus in the banking system stood at 2.79 trln rupees on Tuesday against 2.86 trln rupees on Monday, data from the RBI showed. The liquidity surplus on Monday was the highest since Jul 6, 2022. Last week, inflows of around 1.60 trln rupees on account of the government's month-end spending boosted the liquidity in the banking system, dealers said. 

Market participants said that as the triparty repo (TREPS) is trading below the RBI's repo rate, the central bank may announce a two-day or an overnight variable rate reverse repo of around 500-750 bln rupees to drain the excess liquidity in the banking system.

At 0930 IST, triparty repo was trading at a weighted average rate of 6.28%.

On Tuesday, the RBI conducted two variable rate reverse repo operations for a total amount of 1.25 trln rupees. At the first auction, which was a three-day operation with a notified amount of 750 bln rupees, banks parked 238.03 bln rupees. At the second overnight reverse repo auction, banks parked 199.54 bln rupees against the total notified amount of 500 bln rupees.

Including Tuesday's auction, there are a total of four variable rate reverse repo tenders worth 1.86 trln rupees outstanding, which will be reversed on Friday.

Dealers expect outflows of around 500-600 bln rupees on account of excise and tax-deducted-at-source payments today.

Banks maintained lower-than-required cash balances with the RBI. They maintained 9.64 trln rupees on Tuesday, lower than the average daily cash reserve requirement of 9.81 trln rupees for the current fortnight ending Friday, according to the data. Banks maintained higher cash balances with the RBI last week, and so far they have maintained an average of 9.90 trln rupees for the current fortnight, which means there will be lower demand for funds to meet reserve requirements. (Richard Fargose)

The following are the other highlights:

* The weighted average call rate was 6.50%, against 6.41% on Tuesday.

* The weighted average rate for triparty repo was 6.29%, as against 6.24% on Tuesday.

* Reversal of the standing deposit facility added 898.57 bln rupees to the banking system, while reversal of the marginal standing facility drained 42.17 bln rupees. 

* The call rate is seen in a range of 6.20-6.60% during the day.

End

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

Edited by Tanima Banerjee

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