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Informist, Tuesday, Aug 20, 2024

 

By Vidhushi RajPurohit

 

MUMBAI – The interbank call money rate closed today below the Reserve Bank of India's repo rate of 6.50%, as comfortable liquidity conditions led to the ease in demand for funds from banks towards the end, amid goods and services tax outflows, dealers said. The call rate for one-day loans ended at 6.40%, against 5.85% on Monday.

 

Market participants said the goods and services tax outflows, which started today, have lead to firm demand for funds during the day. "Today, looking at the call rates as they eased in the later part of the day, GST outflow might have been in the range of 50,000-70,000 crores (500-700 bln rupees)," said a dealer with a private bank. "The total outflow amount is expected to be around 1.60 trln rupees."

 

The liquidity surplus in the banking system contracted to 1.17 trln rupees on Monday, down from a peak of 1.64 trln rupees on Sunday. On Monday, the payment for the weekly gilts auction, held on Friday, resulted in a 340-bln-rupee outflow. Market participants anticipate the liquidity surplus inching down further this week due to GST outflow.

 

Meanwhile, the government's spending is expected to provide support for liquidity and prevent any sharp decline.

 

"Beyond the GST-led frictional tightness, we continue to expect liquidity conditions to remain comfortable with minimal currency leakage and government spending," Kotak Mahiandra Bank said in a research report published on Monday. 

 

On Friday, inflows via reversal of three variable rate repo auctions are set to add a total of 375.14 bln rupees into the banking system. 

 

"Banks stayed subdued at today's variable rate repo auction because the reversal of the auction is after the GST payment date," said a dealer with a state-owned bank. Today's, three-day, 250-bln-rupee variable rate repo auction saw meagre bids from the banks as they parked 8.75 bln rupees with the central bank.   

 

The following are the highlights of the day:

* The weighted average call rate was 6.50%, against 6.49% on Monday.

* The weighted average rate for triparty repo was 6.33%, flat from Monday.

* Reversal of the standing deposit facility infused 957.40 bln rupees into the banking system, while reversal of the marginal standing facility drained 16.90 bln rupees.

 

OUTLOOK

* On Wednesday, the one-day call money rate may open above the repo rate of 6.50% due to demand for funds from banks amid GST outflow.

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

 

CALL RATE

6.40%--Today's close for one-day loans

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

5.85%--Monday's close for one-day loans

 

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

TENURE	TODAY	MONDAY
Overnight	6.59	6.55
3-day	--	--
14-day	6.93	6.93
1-month	7.08	7.07
3-month	7.27	7.27

 

---

India Call: Above RBI repo rate; liquidity surplus may narrow further

 

MUMBAI – The interbank call money rate today was above the Reserve Bank of India's repo rate of 6.50%. At 0920 IST, the one-day call money rate was at 6.55%, against 5.85% at the close for one-day loans on Monday.

 

According to market participants, the higher rate was owing to the greater demand for funds by banks amid the payment for goods and services tax scheduled today and on Wednesday. The triparty repo rate was traded in a range of 6.38-6.45% so far.

 

On Monday, the liquidity surplus in the banking system was at 1.17 trln rupees against 1.64 trln rupees on Sunday. The liquidity surplus narrowed due to payment for the 340-bln-rupee weekly gilts auction conducted on Friday, dealers said. 

 

Market participants expect the banking system liquidity to turn neutral this week due to outflows for GST payments. "The outflow on account of GST payment will be around 1.50-1.60 trln rupees," a dealer at a private bank said. The outflows on account of GST payment will be offset by the inflows due to government month-end spending next week, and so liquidity conditions may remain tight for the remainder of this week.  

 

On Monday, the RBI conducted a 4-day variable rate reverse repo operation worth 750 bln rupees. The auction saw banks park 216.85 bln rupees with the central bank. Reversal of the same will take place on Friday. A three-day, 250-bln-rupee reverse repo tender will take place 1030-1100 IST, though participation is expected to be minimal considering the outflows, dealers said.

 

In addition to the fine-tuning operations, the 14-day, 1-trln-rupee variable rate reverse repo tender will also reverse on Friday. At the RBI's main liquidity operations, banks have parked 149.54 bln rupees at a cutoff rate of 6.49%.

 

The following are the other highlights:

* The weighted average call rate was 6.59%, against 6.49% on Monday.

* The weighted average rate for triparty repo was 6.44%, as against 6.33% on Monday.

* Reversal of the standing deposit facility infused 957.40 bln rupees into the banking system, while reversal of the marginal standing facility drained 1.69 bln rupees. 

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

 

End

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

 

Filed by Manisha Baxla

 

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