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Informist, Wednesday, Aug 28, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate today closed at the Reserve Bank of India's standing deposit facility rate of 6.25% owing to ease in demand for funds towards the end of trade amid surplus liquidity, dealers said. Today, the call money rate ended at 6.25% against 5.75% on Tuesday. 

According to RBI data, the liquidity surplus in the banking system widened to 1.04 trln rupees on Tuesday against 822.35 bln rupees on Monday. Market participants attributed the 200 bln rupees increase in surplus to partial inflow through the government's month-end spending. "The main influx of the spending will likely start from Thursday," a dealer at a state-owned bank said. "The surplus liquidity will remain in the current comfortable range due to the lack of scheduled outflows and this week's inflows through the spending." 

"Inflows worth around 200 bln rupees have likely entered the banking system today on account of the government's month-end spending," a dealer at a private bank said. "The total inflow from the spending will be to the tune of 1.00 trln rupees." 

Despite the surplus liquidity, banks parked only 98.75 bln rupees at the two-day, 500-bln-rupee variable rate reverse repo auction today. Banks refrained from participating aggressively at the auction as the interbank borrowing rates were more appealing and, besides, they had already parked 290.80 bln rupees on Monday at the 4-day variable rate reverse repo auction, dealers said. 

Banks increased their cash balance with the RBI to match it against the average daily cash reserve requirement. They maintained 9.90 trln rupees on Tuesday, the same as the required amount for the current fortnight ending Sep 6. Since the start of the current fortnight, banks have maintained an amount around the 90% threshold limit for the reserve requirement. "As the surplus liquidity has risen, banks will try to maintain higher reserve with the central bank," a dealer at a state-owned bank said. 

The following are the other highlights:

* The weighted average call rate was 6.56%, as against 6.51% on Tuesday.

* The weighted average rate for triparty repo was 6.46%, as against 6.40% on Tuesday.

* The reversal of the standing deposit facility added 699.08 bln rupees to the banking system, while the reversal of the marginal standing facility drained 23.65 bln rupees. 

OUTLOOK 

* On Thursday, 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

6.25%--Today's close for one-day loans

6.60%--Today's open for one-day loans

5.75%--Tuesday'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; liquidity surplus widens on govt spending

MUMBAI – The interbank rates opened above the RBI's repo rate of 6.50% today amid firm demand for funds from banks during early trading hours, dealers said. The one-day call money rate was at 6.60% at 0925 IST, against 6.50% on Tuesday. Market participants expect the interbank borrowing rate to moderate during the later part of the day owing to the surplus liquidity.

At the close of yesterday's trading hours, RBI announced a 2-day 500-bln-rupee variable rate reverse repo auction scheduled today between 1030 IST and 1100 IST. Market participants expect bids within the range of 150-200 bln rupees at the auction. "Owing to the prevailing surplus liquidity and RBI's regular variable rate reverse repo auctions in the previous fortnight, the announcement of the auction was on expected lines", dealer at a state-owned bank said. 

The liquidity surplus in the banking system widened to 1.04 trln rupees on Tuesday, from 822.35 bln rupees on Monday, data from the RBI showed. "Likely, the surplus increase is due to inflow on account of the government's month-end spending," a dealer at a private bank said. Market participants anticipate the inflows through the spending to keep the surplus in a state afloat. 

On Tuesday, states raised 362.50 bln rupees through bonds, which is the largest so far in the current financial year starting from April. However, outflows from state bond auction are unlikely to impact the liquidity conditions due to expected inflows on account of government spending, dealers said.  

Banks maintained higher cash balances with the RBI amid surplus liquidity in the banking system. They maintained 9.90 trln rupees on Tuesday, up from 9.80 trln rupees on Monday. The average daily cash reserve requirement for the current fortnight ending Sep 6 is 9.90 trln rupees, according to the data. 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 6.60%, against 6.51% on Tuesday.

* The weighted average rate for triparty repo was 6.42%, as against 6.40% on Tuesday.

* Reversal of the standing deposit facility added 699.08 bln rupees to the banking system, while reversal of the marginal standing facility drained 23.65 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

Edited by Vandana Hingorani

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