More Stories

Informist, Wednesday, Aug 21, 2024

By Richard Fargose and Vidhushi RajPurohit

MUMBAI – The interbank call money rate closed slightly below the Reserve Bank of India's standing deposit facility rate of 6.25% today as demand for funds subsided towards the end of the day, dealers said. The call money rate for one-day loans ended at 6.24%, against 6.40% on Tuesday.

However, for most part of the session, the call money rate was above the RBI's repo rate of 6.50% due to outflows on account of goods and services tax payments.

The call rate rose to a high of 6.60% during the day and at certain intervals it dipped to 5.80%. "Despite the surplus liquidity, banks had a high demand for funds today due to the outflow on account of payment for GST," a dealer with a state-owned bank said.

The weighted average rate was 6.53% against 6.50% on Tuesday. The weighted average triparty repo was 6.40%, 7 basis points higher than the previous session.

Meanwhile, the surplus liquidity in the banking system widened to 1.26 trln rupees on Tuesday against 1.17 trln rupees on Monday, according to the data from the RBI. The surplus liquidity would have narrowed today on account of outflow for GST, dealers said.

On Tuesday, banks saw outflows on account of GST payments to the tune of 600-700 bln rupees, dealers said. Market participants estimate the total GST outflow at 1.50-1.60 trln rupees.

For the first time in the current fortnight, the RBI did not conduct a variable rate reverse repo auction. "Yesterday's tepid response from the banks to the three-day VRRR auction and high TREPs rate would have prevented the central bank from conducting another auction today," a dealer said. On Tuesday, banks parked a meagre 8.75 bln rupees against the 250-bln-rupee, three-day variable rate reverse repo auction.

On Friday, three variable rate reverse repo tenders of 375.14 bln rupees are due for reversal.

The following are the highlights of the day:

* The weighted average call rate was 6.53%, against 6.50% on Tuesday.

* The weighted average rate for triparty repo was 6.40%, against 6.33% on Tuesday.

* Reversal of the standing deposit facility infused 1.03 trln rupees into the banking system, while reversal of the marginal standing facility drained 12.02 bln rupees.

OUTLOOK

* On Thursday, the one-day call money rate may open above the repo rate of 6.50% due to demand for funds from banks after today's GST outflow.

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

CALL RATE

6.24%--Today's close for one-day loans

6.60%--Today's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI repo rate on banks' demand to meet GST outflows

MUMBAI – The interbank call money rate opened above the Reserve Bank of India's repo rate of 6.50% today because of high demand for funds from banks amid goods and services tax outflows, dealers said. At 0930 IST, the one-day call money rate was at 6.60%, against 6.40% at the close on Tuesday.

"The interbank rate is expected to trade at a higher range today owing to the GST outflow," a dealer at a private bank said. "The one-day call money rate may trade around RBI's marginal standing facility rate of 6.75%%"  

However, the liquidity surplus in the banking system widened to 1.26 trln rupees on Tuesday, after a slight dip on Monday when it was 1.17 trln rupees, data from the RBI showed. Dealers said likely inflows on account of government spending could have provided support to liquidity and prevented it from going down further.

Market participants said that banks are cautious as they prepare for tightening of liquidity this week after the outflow due to the payment for goods and services tax. "On Tuesday, a partial outflow was observed on account of the GST payments. Meanwhile, banks are expecting liquidity today to go down as the remaining payments will leave the (banking) system today," a dealer at a state-owned bank said.

"The total outflow on account of GST payments is estimated around 1.50-1.60 trln rupees," a dealer at a private bank said. Market participants expect the government's month-end spending in the next week will provide support to the liquidity.

Banks maintained lower-than-required cash balances with the RBI. They maintained 9.62 trln rupees on Tuesday, lower than the average daily cash reserve requirement of 9.83 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 9.92 trln rupees for the current fortnight, which means there will be lower demand for funds to meet reserve requirements for the rest of this week.

The following are the other highlights:

* The weighted average call rate was 6.60%, against 6.50% on Tuesday.

* The weighted average rate for triparty repo was 6.46%, as against 6.33% on Tuesday.

* Reversal of the standing deposit facility added 1.03 trln rupees to the banking system, while reversal of the marginal standing facility drained 12.02 bln rupees. 

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

End

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

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.