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Informist, Thursday, Sep 19, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate today closed above the Reserve Bank of India's repo rate of 6.50% owing to strong demand for funds from banks, dealers said. Today, the one-day call money rate ended at 6.60% against 6.75% for two-day loans on Tuesday.

The liquidity in the banking system was at a deficit of 26.26 bln rupees on Wednesday, against a surplus of 221.52 bln rupees on Monday, RBI data showed. Banks expect the liquidity to remain in a tight range for the rest of September until the government's month-end spending hits the banking system, dealers said. "The deficit might widen a bit further after the outflow for GST (goods and services tax) leaves the system," a dealer at a state-owned bank said. "Around 1 trln rupees is expected to be the amount of outflow for GST payments."

Amid the deficit liquidity, the one-day call money rate opened near the RBI's marginal standing facility rate of 6.75%. After opening at 6.65%, the rate moderated during the day as demand for funds from banks eased owing to lack of any significant outflows for the day, dealers said. "Though liquidity is no longer in surplus, banks did not have much demand for funds during the day as there were no scheduled outflows," a dealer with a private bank explained. "Banks also received inflow from the reversal of SDF (standing deposit facility) which helped them to manage operations."

According to RBI data, banks parked 834.07 bln rupees with the central bank under the standing deposit facility on Wednesday, against 778.81 bln rupees on Tuesday.

Market participants expect the RBI to conduct a variable rate repo auction on Friday, to inject liquidity in the banking system ahead of the goods and services tax outflow. "RBI might step in with a short-tenure VRR to aid banks with liquidity management," a dealer with another state-owned bank said. On Tuesday, banks borrowed 826.30 bln rupees at variable rate repo auctions at the cut-off rate of 6.51%. 

Banks' cash balance with the RBI was at 9.63 trln rupees on Wednesday, slightly down from 9.65 trln rupees on Tuesday. For the current fortnight, the average daily cash reserve requirement is 9.90 trln rupees. 

On Friday, two variable rate reverse repo tenders of 997.13 bln rupees are due for reversal.

The following are the other highlights:

* The weighted average call rate was 6.65%, unchanged from on Tuesday.

* The weighted average rate for triparty repo was 6.46%, against 6.60% on Tuesday.

* Reversal of the standing deposit facility added 834.07 bln rupees to the banking system, while reversal of the marginal standing facility drained 108.07 bln rupees. 

OUTLOOK
* On Friday, the three-day call money rate may open near the RBI's repo rate due to demand for funds from banks early in the day to meet their reserve requirements.

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

CALL RATE

6.60%--Today's close for one-day loans

6.65%--Today's open for one-day loans

6.00%--Tuesday's close for two-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Near MSF rate; liquidity in deficit post tax outflows 

MUMBAI – The interbank call money rate was near the Reserve Bank of India's marginal standing facility rate of 6.75% today, owing to strong demand for funds from banks in early trades as the liquidity slipped into deficit mode for the first time since Jun 27, dealers said. At 0945 IST, the one-day call money rate was at 6.75%, unchanged from the close on Tuesday for two-day loans.

Money markets were closed on Wednesday due to the postponement of the holiday for Id-e Milad. Money markets were earlier scheduled to be closed on Monday due to Id-e-Milad, but the holiday was shifted to Wednesday by the Maharashtra government.

On Tuesday, liquidity in the banking system was in a deficit of 49.83 bln rupees, as against 221.53 bln rupees surplus on Monday and 1.35 trln rupees on Sunday. "Tax outflows have happened over Monday and Tuesday," a dealer with a state-owned bank. "Liquidity will remain under pressure for few more weeks as GST (goods and service tax) outflows also scheduled this week."

Market participants said outflows of around 1.25 trln rupees are estimated to leave the banking system on account of advance tax payments. 

However, dealers said net inflows on account of redemption of treasury bills, in the absence of T-bill auctions this week and the next, will support the systemic liquidity.

Last week, the RBI cancelled two auctions of Treasury bills scheduled for Sep 18 and Sep 25, respectively. At each of the auctions, the government was scheduled to borrow 80 bln rupees through the 91-day T-bill, and 60 bln rupees each through the 182-day T-bill and 364-day T-bills. Following this move, the government's gross borrowing via T-bills for Jul-Sep will fall to 2.20 trln rupees.

Dealers expect the RBI to announce an overnight variable rate repo auction of around 500 bln rupees as interbank rates are hovering around the MSF rate of 6.75%.

The following are the other highlights:

* The weighted average call rate was 6.74%, as against 6.65% on Tuesday.

* The weighted average rate for triparty repo was 6.61%, as compared to 6.60% on Tuesday.

* Reversal of the standing deposit facility added 27.47 bln rupees to the banking system, while reversal of the marginal standing facility drained 1.34 bln rupees. 

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

End

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

Edited by Rajeev Pai

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