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Informist, Thursday, Aug 29, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate today closed near the Reserve Bank of India's marginal standing facility rate of 6.75% owing to strong demand for funds from banks, despite surplus liquidity, dealers said. Today, the call money rate ended at 6.70% against 6.25% on Wednesday. 

The one-day call money rate traded in a higher band on demand for funds from banks. After opening at 6.70%, the rate went up to 7.00%. During the day it was above the RBI's repo rate for the most part. "Despite surplus liquidity in the broader banking system, some banks were still tight on liquidity, leading to high interbank borrowing rates," a dealer at a state-owned bank said.    

The surplus liquidity in the banking system was at 948.45 bln rupees on Wednesday, slightly down from 1.04 trln rupees on Tuesday, RBI data showed. Banks were expecting inflow from the government's month-end spending today, but it seems to be delayed, dealers said. "The spending is likely to enter the (banking) system by Sep 2 (Monday) this time," a dealer at a state-owned bank said.

"On Wednesday, banks had parked funds at VRRR (variable rate reverse repo) auction and there was outflow from the state bond auction as well," a dealer at a private bank said. "The outflows were made while anticipating the influx from month-end spending." Wednesday's payment for the auction of state government securities, held on Tuesday, resulted in an outflow of 362.50 bln rupees.

Currently, banks have parked a total of 593.32 bln rupees at variable rate reverse repo auctions. 

Market participants expect the interbank borrowing rates to remain firm on Friday if the salary and pension payments from the government are not reflected in the banking system on Friday.

Banks' cash balance with the RBI was at 9.78 bln rupees on Wednesday, slightly down from 9.89 bln rupees on Tuesday. For the current fortnight, the average daily cash reserve requirement is 9.89 bln rupees. 

On Friday, two variable rate reverse repo tenders of 389.55 bln rupees are due for reversal. Post market hours today, the RBI announced a 1-trln-rupee, 7-day variable rate reverse repo auction between 1030 IST and 1100 IST on Friday.

The following are the other highlights:

* The weighted average call rate was 6.66%, as against 6.56% on Wednesday.

* The weighted average rate for triparty repo was 6.63%, as against 6.46% on Wednesday.

* The reversal of the standing deposit facility added 504.27 bln rupees to the banking system, while the reversal of the marginal standing facility drained 14.77 bln rupees. 

OUTLOOK 

* On Friday, the three-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 6.20-6.75%, dealers said.

CALL RATE

6.70%--Today's close for one-day loans

6.70%--Today's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Near RBI's MSF rate on strong fund demand from some banks

MUMBAI – The interbank call money rate opened near the Reserve Bank of India's marginal standing facility rate of 6.75% today, owing to strong demand for funds from some banks during early trading hours, despite a liquidity surplus in the banking system, dealers said. At 0930 IST, the one-day call money rate was at 6.70%, against 6.25% on Wednesday.

"The one-day call money rate opened at a high rate today, owing to demand for funds from some banks to meet any sudden outflow," a dealer at a state-owned bank said. "Overall, there is an adequate surplus in the (banking) system, but the surplus is not evenly spread amongst all banks." 

On Wednesday, liquidity in the banking system was in a surplus of 948.45 bln rupees, against 1.04 trln rupees on Tuesday, according to RBI data. "The liquidity in the banking system narrowed slightly on account of yesterday's VRRR (variable rate reverse repo) auction," dealers said. Banks parked 87.18 bln rupees at the two-day, 500-bln-rupee variable rate reverse repo auction on Wednesday. So far in the current fortnight, banks have parked a total of 593.32 bln rupees at RBI's variable rate reverse repo auctions. 

Market participants expect the interbank borrowing rates to remain in the upper range today. "With (around) 600 bln (rupees) blocked in VRRR, banks have less funds to lend in the market," a dealer at a state-owned bank said. 

The liquidity in the banking system is anticipated by the market participants to remain in the current range of surplus. "Inflows through the government's month-end spending are expected to be to the tune of 800 bln rupees to 1.00 trln rupees," a dealer at a state-owned bank said.  

On Wednesday, banks' cash balance with the RBI was 9.78 trln rupees, against 9.89 trln rupees on Tuesday. The reduction in cash balance is still within the 90% threshold limit for the average daily cash reserve requirement. 

Today, no major outflows are expected, dealers said. 

With the weighted average tri-party repo rate hovering around 6.55%, dealers do not expect a variable rate reverse repo auction today.

The following are the other highlights:

* The weighted average call rate was 6.70%, against 6.56% on Wednesday.

* The weighted average rate for triparty repo was 6.54%, as against 6.46% on Wednesday.

* Reversal of the standing deposit facility added 504.27 bln rupees to the banking system, while reversal of the marginal standing facility drained 14.77 bln rupees. 

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

End

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

Edited by Saji George Titus

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