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Informist, Friday, Sep 6, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended at the Reserve Bank of India's standing deposit facility rate of 6.25% today on account of low demand for funds from banks as systemic liquidity stays in surplus, dealers said. The call money market rate for three-day loans settled at 6.25%, against 6.24% for one-day loans on Thursday.

On Thursday, liquidity in the banking system was in a surplus of 2.55 trln rupees, against 2.46 trln rupees on Thursday. In the coming days, the surplus may narrow due to several outflows coming up, dealers said. "On Monday, the outflow for the excise and TDS (tax deducted at source) payments is lined up," a dealer with a state-owned bank said. Market participants expect outflows for excise duty payments to be around 500 bln rupees. 

The interbank borrowing rates traded in a moderate range during the day, despite it being a reporting Friday. "Usually, on a reporting Friday, banks have a high demand for funds to meet the reserve requirements," a dealer with a state-owned bank said. "However, the demand remained subdued during the day as the liquidity in the (banking) system is comfortable." The call money rate was in the range of 5.10-6.60%. Meanwhile, the triparty rate stayed below the RBI's repo rate of 6.50% as it traded in the range of 6.00-6.37%.

Despite the surplus liquidity, banks refrained from bidding aggressively at the 14-day, 500-bln-rupee variable rate reverse repo auction. Banks only parked 170.83 bln rupees at the auction. The auction will be reversed on Sep 20. "Banks did not want to lock up their funds at the 14-day auction, as the payment for the advance tax is scheduled to take place before the reversal date of the auction," a dealer at another state-owned bank said. The outflow for the advance tax payment is scheduled around Sep 15.

After the underwhelming response at the 14-day auction, the central bank conducted a 4-day, 1-trln-rupee variable rate reverse repo auction. The shorter-tenure auction elicited better participation; banks parked 483.95 bln rupees at the auction. The auction will be reversed on Tuesday.

A net total of 2.05 trln rupees came back into the banking system due to the reversal of the six variable rate reverse repo auctions of varying tenures held during the fortnight that ended today. Amid surplus liquidity, banks increased their cash balance with the RBI. On Thursday, banks' cash balance with the RBI stood at 9.81 trln rupees, slightly up from 9.77 trln rupees on Wednesday. Until Thursday, banks have maintained an average amount of 9.92 trln rupees against the statutory required limit of 9.89 trln rupees.

The following are the other highlights:

* The weighted average call rate was 6.48%, against 6.49% on Thursday.

* The weighted average rate for triparty repo was 6.27%, against 6.30% on Thursday.

* The reversal of the standing deposit facility added 727.03 bln rupees to the banking system, while the reversal of the marginal standing facility drained 109.30 bln rupees. 

OUTLOOK

* Money markets are shut on Saturday for Ganesh Chaturthi.

* On Monday, the one-day call money rate may open near the RBI's repo rate due to demand from funds from banks in early trade despite a liquidity surplus.

* Outflows on account of excise duty and tax deducted at source payments are due to begin Monday.

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

CALL RATE

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

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above repo even as liquidity surplus widens more 

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% today owing to demand for funds from some banks early in the day to meet their reserve requirements, dealers said. At 0930 IST, the three-day call money rate was at 6.60%, against 6.24% for one-day loans on Thursday.

On Thursday, the liquidity surplus in the banking system was 2.55 trln rupees, slightly higher than 2.46 trln rupees on Wednesday, according to RBI data. The surplus widened due to likely regular government spending, dealers said. Liquidity in the banking system had widened earlier this week after inflows on account of the government's month-end spending infused around 1 trln rupees into the banking system, dealers said. 

Market participants expect the liquidity to narrow in the next fortnight, starting Saturday, owing to outflows for payment of excise duty, tax at source, and advance tax. "In the next fortnight, tax payments are scheduled. So, in all likelihood, the surplus liquidity is expected to reduce," a dealer with a state-owned bank said. "The surplus liquidity has achieved the peak this week; henceforth, no major inflows are in sight for the new fortnight." 

Dealers remain unsure about the exact date for the outflow of excise duty and tax at source. "The excise and TDS (tax deducted at source) payments might take place in tranches," a dealer at another state-owned bank said. "Some outflow might occur during the day, and the rest of it will leave the (banking) system on Monday." Usually, the payment takes place on 6th and 7th of every month. Saturday, Sep 7, is a bank holiday in some parts of the country owing to Ganesh Chaturthi.

Today, the central bank will hold a 14-day variable rate repo auction for a notified amount of 500 bln rupees. The auction will be held from 1030 IST to 1100 IST. Market participants expect banks to park around 150 bln rupees at the auction. "Banks will likely refrain from bidding aggressively at the auction as the due date for reversal falls after the date of advance tax payment," a dealer with a private bank said. The outflow for advance tax payment is expected to take place around Sep 15, dealers said.

Today, six variable rate reverse repo tenders of 2.05 trln rupees are due for reversal. Market participants expect the central bank to announce another shorter-tenure variable rate reverse repo auction during the day. "The RBI might conduct a 3-day or a 7-day VRRR today," a dealer with another state-owned bank said.

On Thursday, banks' cash balance with the RBI stood at 9.81 trln rupees against 9.77 trln rupees on Wednesday. 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 6.60%, against 6.49% on Thursday.

* The weighted average rate for triparty repo was 6.34%, as against 6.30% on Thursday.

* Reversal of the standing deposit facility added 727.03 bln rupees to the banking system, while reversal of the marginal standing facility drained 109.30 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 Deepshikha Bhardwaj

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