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Informist, Tuesday, Aug 13, 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 Monday.

The RBI today conducted a three-day reverse repo auction for 500 bln rupees to drain out excess liquidity, but banks parked only 166.95 bln rupees at this auction. Hence, owing to lacklustre participation in the three-day reverse repo, the central bank announced an overnight variable rate reverse repo for the notified amount of 500 bln rupees. However, banks parked only 58.10 bln rupees at the overnight reverse repo.

"Currently, liquidity surplus is not that large, which warrants multiple reverse repo auctions in a day," said a dealer with a private bank. "The RBI has announced the overnight auction as TREPs rates were down. The RBI always aim to keep the overnight rates around 6.50% (repo rate)."

Today, the weighted average triparty repo rate was 6.34%. The liquidity surplus in the banking system was at 1.13 trln rupees on Monday against 1.22 trln rupees on Sunday, data from the RBI showed. Market participants see liquidity narrowing further in the current fortnight due to GST outflows scheduled next week. 

Banks are expected to continue to maintain higher cash balances with the central bank due to the start of the new reporting fortnight from Saturday. 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.

They maintained 9.97 trln rupees on Monday as against 9.83 trln rupees the average daily cash reserve requirement for the current fortnight ending on Aug 23.

The following are the other highlights:

* The weighted average call rate was 6.48%, against 6.47% on Monday.

* The weighted average rate for triparty repo was 6.34%, against 6.28% on Monday.

* Reversal of the standing deposit facility added 696.27 bln rupees to the banking system, while reversal of the marginal standing facility drained 12.36 bln rupees. 

OUTLOOK

* On Wednesday, the two-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.

* Indian Financial markets will be shut on Thursday on account of Independence Day. 

* However, the rates may ease intraday owing to comfortable 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%--Monday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call:Above repo rate on demand from bks, RBI to hold 3-day VRRR

MUMBAI - The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% today due to demand from some banks in early trade to meet reserve requirements, dealers said. The one-day call money rate was at 6.55% at 0930 IST, against 5.75% at the close on Monday.

However, market participants said the interbank call money rate may ease intraday as liquidity still remains comfortable. The liquidity surplus in the banking system was at 1.13 trln rupees on Monday, against 1.22 trln rupees on Sunday, data from the RBI showed.

"There are no major outflows lined-up this week, and we expect some inflows due to likely government spending," said a dealer with a state-owned bank.

Banks are expected to maintain higher cash balances with the central bank due to the start of the new reporting fortnight from Saturday. 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. They maintained 9.98 trln rupees on Monday, as against 9.83 trln rupees--the average daily cash reserve requirement for the current fortnight ending on Aug 23.

Market participants see liquidity narrowing further in the current fortnight due to GST outflows scheduled next week. 

The RBI has announced a three-day variable rate reverse repo auction for a notified amount of 500 bln rupees between 1000 IST and 1030 IST today. Participants expect total bids between 150 bln rupees and 250 bln rupees at the auction. 

Market participants said that as the triparty repo is trading below the RBI's repo rate, some banks may borrow funds through the triparty repo route and will park the same at variable rate reverse repo tender at 6.49%. 

At 0940 IST, triparty repo was trading at a weighted average rate of 6.35%.

The following are the other highlights:

* The weighted average call rate was 6.55% as against 6.47% on Monday.

* The weighted average rate for triparty repo was 6.35%, as against 6.28% on Monday.

* Reversal of the standing deposit facility added 696.27 bln rupees to the banking system, while reversal of the marginal standing facility drained 12.36 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 Akul Nishant Akhoury

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