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Informist, Friday, Sep 20, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended at the Reserve Bank of India's marginal standing facility rate of 6.75% today on demand for funds from some banks, dealers said. The call money market rate for three-day loans ended at 6.75%, against 6.60% for one-day loans on Thursday.

During the day, the call money rates traded in a narrow range. After opening at 6.75%, it traded below the RBI'S repo rate for the majority of the trading hours. "Banks who were in need of funds were borrowing funds at the TREP (triparty repo) market today, as it is a more secure avenue," a dealer with a state-owned bank said. The triparty repo rate was seen trading in the range of 6.47%-6.91%. 

Despite narrow surplus liquidity, market participants saw less borrowing at the call money market as the central bank stepped in with the variable rate repo auction, adding to that no outflows were scheduled for the day. "The surplus liquidity is still in a narrow position, but banks did not have the need to aggressively borrow as they have maintained adequate reserve requirements since the start of this fortnight and soon the inflows from government's month-end spending will boost the liquidity," a dealer with a private bank said. The three-day call rate was in the range of 5.10%-6.75%, data from the clearing corporation of India showed. 

On Thursday, liquidity in the banking system was in a surplus of 248.25 bln rupees, against the deficit of 26.26 bln rupees on Wednesday. Market participants find it probable that the liquidity might slip again into deficit owing to the payment of goods and services tax, which is scheduled for Saturday. "Even if the liquidity goes into deficit after the tax outflows, it will rise again after inflow from government spending, which is due to enter the (banking) system next week," a dealer with a state-owned bank said.

Amid the narrow surplus liquidity, banks bid aggressively at the 14-day, 250-bln-rupee variable rate repo auction. The auction was oversubscribed as banks put bids of 405.26 bln rupees. The central bank accepted bids worth 250.02 bln rupees at the cut-off rate of 6.52%. The auction will be reversed on Oct 4. 

Market participants expect that the RBI might announce a short-tenure variable rate repo auction on Monday as well to support the systemic liquidity. "The liquidity might slip into deficit after the GST outflows, hence there are chances that the RBI may announce a short tenure VRR auction on Monday," a dealer at another state-owned bank said.

On Thursday, banks parked 9.58 trln rupees as the cash balance with the RBI, slightly down from 9.63 trln rupees on Wednesday. So far for the current fortnight ending today, banks have maintained an average amount of 9.95 trln rupees, which is higher than the mandatory required limit of 9.90 trln rupees for this fortnight. 

The following are the other highlights:

* The weighted average call rate was 6.69%, against 6.65% on Thursday.

* The weighted average rate for triparty repo was 6.59%, against 6.46% on Thursday.

* The reversal of the standing deposit facility added 1.09 trln rupees to the banking system, while the reversal of the marginal standing facility drained 53.04 bln rupees. 

OUTLOOK

* On Saturday, the two-day call money rate may open near the RBI's repo rate due to demand for funds from banks in early trade.

* Outflows on account of goods and services tax payments are due to begin on Saturday.

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

CALL RATE

6.75%--Today's close for three-day loans

6.75%--Today's open for three-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's MSF rate on demand for funds from banks 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility rate of 6.75% today, owing to strong demand for funds from banks in early trade to meet reserve requirements, dealers said. At 0945 IST, the three-day call money rate was at 6.75%, against 6.60 at the close on Tuesday for one-day loans.

On Thursday, liquidity in the banking system was in a surplus of 248.24 bln rupees, against a deficit of 49.83 bln rupees on Wednesday. Since Jun 27, liquidity slipped into deficit for the first time on Tuesday after payment for advance tax. "Inflows from regular government sending and the redemption of T-bills (treasury bills) picked up systemic liquidity," a dealer with a private bank said. "Even though the liquidity is back in surplus, the outflow for the GST (goods and services tax) payment will put pressure on the liquidity." 

Outflow for goods and services tax payment is scheduled on Saturday, dealers said. 

They said net inflows on account of redemption of treasury bills, in the absence of T-bill auctions, supported systemic liquidity. Inflows of around 328 bln rupees entered the system from redemption of T-bills auctioned.

Last week, the RBI cancelled two auctions of Treasury bills scheduled for Sep 18 and Sep 25. 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 182-day T-bills and 364-day T-bills. 

Market participants do not expect any major rise in interbank borrowing rates during the day. "The call market rate might trade around the RBI's MSF (marginal standing facility) for some brief time, but the rates will ease as the central bank has stepped in with the (variable rate repo) auction," a dealer with a state-owned bank said.  

After market hours on Thursday, the RBI announced a 14-day, 250-bln-rupee variable rate repo auction to be held at 1030-1100 IST. "The central bank kept the notified amount low, as banks would not want to borrow funds above the repo rate for a tenure of 14 days, as there are expectations of the interbank borrowing rates easing later in the new fortnight when the government's month-end spending boosts liquidity," a dealer with a private bank said. Market participants expect banks to subscribe the full amount at today's auction and the cut-off rate to be around 6.55%-6.65%. 

Dealers expect the RBI to announce a short-tenure variable rate repo auction later in the day to help banks manage their funding requirements amid tax outflows. Today, a variable rate reverse repo tender of 170.83 bln rupee is due for reversal. 

On Thursday, banks' cash balance with the RBI stood at 9.58 trln rupees against 9.63 trln rupees on Wednesday. The average daily cash reserve requirement for this fortnight is 9.90 trln rupees.  

The following are the other highlights:

* The weighted average call rate was 6.75%, as against 6.65% on Thursday.

* The weighted average rate for triparty repo was 6.60%, as compared to 6.46% on Thursday.

* Reversal of the standing deposit facility added 1.09 trln rupees to the banking system, while reversal of the marginal standing facility drained 53.04 bln rupees. 

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

End

Edited by Deepshikha Bhardwaj

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