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Informist, Monday, Aug 26, 2024

By Vidhushi RajPurohit

MUMBAI – The interbank call money rate today closed below the Reserve Bank of India's standing deposit facility of 6.25% as demand for funds from banks eased towards the end of trade, amid a comfortable surplus liquidity in the banking system, dealers said. The one-day call rate ended at 5.75%, unchanged from the three-day call rate of 5.75% on Friday.

On Sunday, the surplus liquidity in the banking system fell to 847.76 bln rupees against 1.04 trln rupees on Friday, the RBI data showed. "At the start of the reporting fortnight, banks had pressure to maintain the reserve requirement with the central bank," a dealer at a state-owned bank said. 

Market participants expect the surplus liquidity to improve further, as the inflow through the government's month-end spending commences this week. "Last week, GST outflow ended and there are no scheduled outflows expected in the current fortnight," a dealer at a private bank said. "An amount to the tune of 400-500 bln rupees is expected to come through month-end spending in the next few days," a dealer at a state-owned bank said.   

The upcoming inflow amid no scheduled outflow is expected to keep the interbank rates in a moderate range this week, dealers said. 

As market participants projected, the RBI conducted a 500-bln-rupee, four-day variable rate reverse repo auction. Banks parked 290.80 bln rupees at the auction which is due for reversal on Friday. "The announcement for the VRRR auction was on the expected lines, considering the last fortnight's frequent fine-tuning operations conducted by the RBI," a dealer with the state-owned bank said. The surplus liquidity and the lower triparty repo rate led the RBI to hold variable rate reverse repo auctions every day, barring two days, in the previous fortnight.

On Sunday, the banks' cash balance with the RBI was 9.86 trln against the daily average requirement of 9.89 trln for the current fortnight ending Sep 6. Banks will try to maintain higher cash reserves with the central bank at the start of the fortnight so that it will lessen the burden on them towards end, dealers said. 

The following are the other highlights:

* The weighted average call rate was 6.52%, as against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.32%, unchanged from Friday.

* The reversal of the standing deposit facility added 987.93 bln rupees to the banking system, while the reversal of the marginal standing facility drained 18.18 bln rupees. 

OUTLOOK 

* On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to strong demand for funds from banks amid early trading hours.

* During the day, the call rate is seen at 6.20-6.80%, dealers said.

CALL RATE

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

6.60%--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: Above repo on demand from some bks; liquidity comfortable 

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% today due to strong demand for funds from some banks during early trading hours, dealers said. At 0930 IST, the one-day call money rate was at 6.60%, as against 5.75% for three-day loans on Friday. 

Market participants expect interbank rates to ease during the day owing to lack of any major outflows lined up for the day amid the prevailing surplus liquidity in the banking system.

On Friday, liquidity in the banking system was in a surplus of 1.04 trln rupees, as against 1.07 trln rupees on Thursday. Last week, inflows on account of government spending and the RBI's intervention in the foreign exchange market led to liquidity in the banking system remaining comfortable despite the outflow of around 1.60 trln rupees for payment of goods and services tax, dealers said.

Market participants expect the RBI to announce a short tenure variable rate repo auction today due to surplus liquidity in the banking system. "In the previous fortnight, the central bank conducted regular VRRR auctions to regulate the interbank rate as the liquidity stayed in surplus," a dealer at a private bank said. "Similarly, this week too, banks are expecting RBI to continue with their fine-tuning operations."

On Friday, the last day of the previous reporting fortnight, banks parked 9.67 trln rupees with the RBI against the average daily requirement of 9.83 trln rupees. During the last fortnight, banks maintained an average daily balance of 9.85 trln rupees with the central bank. "Banks will maintain excess cash reserves with the central bank today, as it is the beginning of a new reporting fortnight, so that the daily average requirement is maintained without any pressure towards the end," a dealer at a private bank said.

Market participants expect the surplus liquidity to remain in the range of 1.0-1.5 trln rupees for the current fortnight. "No significant outflows are lined up for this week and adding to that the government's month-end spending will soon enter the system," a dealer with a state-owned bank said. 

Today, there might be some minor inflow on account of the government's month-end spending, dealers said. Payment for the 230-bln-rupee weekly bond auction held on Friday is also lined up for the day.

Despite an increase in surplus liquidity, on Friday, banks parked only 203.77 bln rupees out of the notified amount of 1 trln rupees at the 14-day variable rate reverse repo auction. The reversal of the tender is scheduled for Sep 6.

The following are the other highlights:

* The weighted average call rate was 6.60% against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.36%, as against 6.32% on Friday.

* Reversal of the standing deposit facility added 987.93 bln rupees to the banking system, while reversal of the marginal standing facility drained 18.18 bln rupees. 

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

End

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

Edited by Akul Nishant Akhoury

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