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Informist, Tuesday, Sep 3, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate closed sharply below the Reserve Bank of India's standing deposit facility rate of 6.25% on low demand for funds from banks amid widening of liquidity surplus, dealers said. Today, the one-day call money rate ended at 5.75%, unchanged from Monday. 

The interbank borrowing rates remained at and below the RBI's repo rate, owing to surplus liquidity. The call money market rate was in the range of 5.10-6.55% and the triparty repo rate traded in the range of 5.90-6.30%. 

On Monday, the surplus liquidity in the banking system rose to 2.23 trln rupees from 1.65 trln rupees on Sunday, RBI data showed. Inflows from the government's month-end spending pulled the liquidity surplus up to its highest level since Aug 6. "Around 600 bln rupees worth of inflows have entered the (banking) system from the spending," a dealer with a state-owned bank said.

The inflows are anticipated to continue till Thursday, dealers said. "While the majority of spending seems to have entered the system on Monday, some minor inflow may be there for a few more days," a dealer at a state-owned bank said.

Despite the surplus liquidity, banks parked only 439.55 bln rupees at the three-day, 1-trln-rupee variable rate reverse repo auction. The high surplus liquidity kept the interbank borrowing rate in the moderate range, leading the central bank to step in with a 750-bln-rupee, overnight variable rate reverse repo auction. Banks parked 184.10 bln rupees at the overnight reverse repo auction. "The inflow from the salary and pension payments is not even amongst all banks," a dealer with a state-owned bank said. "While some banks might have a high surplus, many banks might not." 

Currently, banks have parked an aggregate sum of 1.26 trln rupees at RBI's five variable rate reverse repo auctions.

On Monday, banks maintained 9.74 trln rupees with the RBI, down from 10.12 trln rupees on Sunday. They maintained lower than the average daily cash reserve requirement of 9.89 trln rupees for the current fortnight, according to the data. However, so far they have maintained an average of 9.95 trln rupees for the current fortnight, which is more than the prescribed amount. "Banks have maintained adequate funds with the RBI," a dealer with a state-owned bank said. "This fortnight, with the surplus liquidity, there won't be any additional burden to meet the cash reserve ratio requirement." 
 

The following are the other highlights:

* The weighted average call rate was 6.47%, against 6.49% on Monday.

* The weighted average rate for triparty repo was 6.20%, as against 6.26% on Monday.

* The reversal of the standing deposit facility added 1.74 trln rupees to the banking system, while the reversal of the marginal standing facility drained 11.31 bln rupees. 

OUTLOOK

* On Wednesday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of demand for funds from banks in the early trading hours.

* During the day, the call rate is seen in a range of 6.00-6.60%, dealers said.

CALL RATE

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

6.55%--Today's open for one-day loans

5.75%--Monday'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 highest since Aug 6 

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50%, while liquidity surplus in the banking system was at its highest since Aug 6, dealers said. The one-day call money rate was at 6.55% at 0930 IST, against 5.75% on Monday.

On Monday, liquidity surplus in the banking system was 2.23 trln rupees against 1.65 trln rupees on Sunday, data from the RBI showed. Inflows from the government's month-end spending widened the surplus, dealers said. "The interbank borrowing rate is expected to remain at a moderate range owing to adequate funds with the banks," a dealer with a state-owned bank said.

Market participants expect the surplus liquidity to stay high for rest of the fortnight ending Sep 6. "The surplus liquidity has reached its peak, it will remain in this comfortable range for another week before the outflow from the advance tax payment starts," a dealer with a state-owned bank said. 

Today, no major inflows or outflows are seen taking place, dealers said. On Monday, post market hours, the RBI announced a three-day 1-trln-rupee variable rate reverse repo auction for today between 1030 IST and 1100 IST. The reversal of the same is on Friday. Market participants expect bids of around 400 bln rupees at the auction. On Monday, despite the surplus liquidity, banks parked only 389.65 bln rupees at the RBI's 1.50-trln-rupee four-day variable rate reverse repo auction.

On Monday, banks' cash balance with the RBI stood at 9.74 trln rupees against 10.12 trln rupees on Sunday. The average daily cash reserve requirement for this fortnight is 9.89 trln rupees.

The following are the other highlights:

* The weighted average call rate was 6.55%, as against 6.49% on Monday.

* The weighted average rate for triparty repo was 6.25%, as against 6.26% on Monday.

* The reversal of the standing deposit facility added 1.74 trln rupees to the banking system, while the reversal of the marginal standing facility drained 11.31 bln rupees. 

* The call rate is seen within the range of 6.20-6.60% during the day. (Vidhushi RajPurohit)

End

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

Edited by Deepshikha Bhardwaj

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