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Informist, Monday, Aug 12, 2024

By Richard Fargose

MUMBAI – The interbank call money market ended well below the Reserve Bank of India's standing deposit facility rate of 6.25% as demand from banks eased towards the end, dealers said. The one-day call money rate ended at 5.75%, unchanged from Friday for three-day loans.

The weighted average call rate eased to 6.47% against 6.53% on Friday due to improved funding conditions of banks following the maturity of four variable rate reverse repo tenders of a total of 1.86 trln rupees on Friday, dealers said.

On Friday, the RBI conducted a 1-trln-rupee, 14-day variable rate reverse repo auction today, against the maturity reverse repo tenders of a total of 1.86 trln rupees. However, most banks preferred not to park funds in the 14-day window as funds parked in this tender will not be available to meet the goods and service tax outflows due during the next fortnight. Banks parked only 149.54 bln rupees at the 14-day variable rate reverse repo tender.

The RBI today announced a shorter tenure four-day reverse repo auction for 1 trln rupees, and banks parked 429.70 bln rupees at this auction.

The liquidity surplus narrowed last week on account of excise and tax-deducted-at-source payments and outflows due to the RBI's aggressive intervention in the foreign exchange market, dealers said.

The liquidity surplus in the banking system was at 1.22 trln rupees on Sunday against 2.86 trln rupees on Aug 5, data from the RBI showed. Market participants see liquidity narrowing further in the current fortnight due to GST outflows scheduled next week. 

Banks are maintaining higher cash balances with the central bank due to the start of the new reporting fortnight from Saturday. They maintained 10.02 trln rupees on Sunday as against 9.83 trln rupees the average daily cash reserve requirement for the current fortnight ending on Aug 23.

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%, against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.28%, against 6.32% on Friday.

* Reversal of the standing deposit facility added 784.10 bln rupees to the banking system, while reversal of the marginal standing facility drained 24.46 bln rupees. 

OUTLOOK

* On Tuesday, 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 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

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

6.55%--Today's open for one-day loans

5.75%--Friday's close for three-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call:At repo rate on demand from bks, liquidity surplus narrows

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 trade as the liquidity surplus has narrowed further, dealers said. The one-day call money rate was at 6.50% at 0955 IST, against 5.75% at the close on Friday for three-day loans.

However, the interbank call money rate is likely to ease intraday as liquidity still remains comfortable, dealers said.

Dealers said most banks have avoided parking funds in the 14-day window as funds parked in this tender will not be available to meet the goods and service tax outflows due during the current fortnight. Hence, they are holding excess funds with them.

On Friday, banks parked only 149.54 bln rupees at 14-day variable rate reverse repo tender auction, against the maturity reverse repo tenders of a total of 1.86 trln rupees. Banks parked 1.03 trln rupees at RBI's standing deposit facility on Friday.

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

At 0950 IST, triparty repo was trading at a weighted average rate of 6.29%.

The liquidity surplus narrowed last week on account of excise and tax-deducted-at-source payments and outflows due to the RBI's aggressive intervention in the forex market, dealers said.

The liquidity surplus in the banking system was at 1.46 trln rupees on Friday against 1.66 trln rupees on Thursday, data from the RBI showed.

The following are the other highlights:

* The weighted average call rate was 6.55% as against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.29%, as against 6.32% on Friday.

* Reversal of the standing deposit facility added 194 bln rupees to the banking system, while reversal of the marginal standing facility drained 13.07 bln rupees. 

* The call rate is seen in a range of 6.20-6.75% during the day. (Richard Fargose)

End

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

Edited by Tanima Banerjee

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