More Stories

Informist, Tuesday, Sep 24, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended sharply below the Reserve Bank of India's standing deposit facility rate of 6.25% today on account of low demand for funds from banks in the latter part of the session, dealers said. The call money market rate for one-day loans settled at 5.75%, unchanged from Monday.

Liquidity deficit in the banking system increased to 334.47 bln rupees on Monday, from a deficit of 300.73 bln rupees on Sunday. The liquidity last week slipped into deficit for the first time since Jun 27, due to outflows for the payment of goods and services tax. Despite the liquidity deficit, market participants do not expect any spike in borrowing rates this week. "The deficit is not that high, and the government's month-end spending will soon enter the (banking) system," a dealer with a private bank said. "There is a high probability of liquidity moving back to surplus after the month-end inflows."

During the day, interbank borrowing rates were trading above the RBI's repo rate due to high demand from banks amidst the liquidity deficit. This led the central bank to hold a two-day, 500-bln-rupee variable rate repo auction. Banks participated actively in the auction, as they put total bids amounting to 910.35 bln rupees. Out of the total bids received, the RBI accepted bids worth 500.03 bln rupees at a cut-off rate of 6.64%.

"The oversubscription at the auction was as per the market's expectations as at the time of auction the money market rates were trading around the RBI's MSF (marginal standing facility) rate (6.75%), and banks needed funds to maintain reserve money in addition to meeting their daily requirements," a dealer with a private bank said.

On Monday, banks' cash balance with the RBI was 9.83 trln rupees, as against 9.68 trln rupees on Sunday. The average daily requirement for the current fortnight that started on Saturday is 10.05 trln rupees. "Amid the deficit liquidity, banks are maintaining lower than the required amount with the RBI, but they are still keeping up with the 90% threshold limit," a dealer with a state-owned bank said.

The following are the other highlights:

* The weighted average call rate was 6.69%, against 6.68% on Monday.

* The weighted average rate for triparty repo was 6.66%, against 6.67% on Monday.

* The reversal of the standing deposit facility added 579.19 bln rupees to the banking system, while the reversal of the marginal standing facility drained 33.20 bln rupees. 

OUTLOOK

* On Wednesday, the one-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 the reserve requirements.

* 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

6.75%--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: At MSF rate on demand for funds amid deficit liquidity

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility rate of 6.75% today, owing to demand for funds from banks early in the day to meet their reserve requirements amid a prevailing liquidity deficit in the banking system, dealers said. At 0920 IST, the one-day call money rate was at 6.75%, against 5.75% at close on Monday.

On Monday, the liquidity deficit in the banking system was at 334.47 bln rupees, against 300.73 bln rupees on Sunday, according to RBI data. The liquidity deficit will narrow in the next few days as inflows from the government's month-end spending enter the banking system, dealers said. "Around Sep 30, the inflows from salary and pension payment will start, and it will lift the liquidity back into surplus," a dealer at a state-owned bank said. 

Market participants are of the view that interbank borrowing rates might remain firm during the day, owing to the widening of the deficit in the banking system. Dealers expect the RBI to intervene with a variable rate repo auction if the rates inch up too high. "Much is dependent on the TREPs (triparty repo) rate. If it trades too high above the central bank's repo rate, then we might see a VRR announcement," a dealer at a private bank said. "Banks might bid aggressively at the auction as yesterday also, the demand for funds at the VRR surpassed the notified amount by a wide margin." 

At 0940 IST, the weighted average rate for triparty repo was 6.67% unchanged from Monday.

Today, the reversal of the overnight, 500-bln-rupee variable rate repo auction will result in an outflow of 500.07 bln rupees from the banking system. The action was oversubscribed as banks put total bids of 1.03 trln rupees. "Banks needed funds to increase the reserve money maintained with the central bank and the interbank borrowing rates were also trading in the high range at the time of auction, hence banks' bids were high at the VRR auction," a dealer at a state-owned bank said.  

On Monday, banks maintained 9.83 trln rupees with the RBI, compared with 9.68 trln rupees on Sunday. For the current fortnight, the average daily cash reserve requirement is 10.05 trln rupees, according to RBI data.

The following are the other highlights:

* The weighted average call rate was 6.77%, against 6.68% on Monday.

* The weighted average rate for triparty repo was 6.66%, against 6.67% on Monday.

* Reversal of the standing deposit facility added 579.19 bln rupees to the banking system, while reversal of the marginal standing facility drained 33.20 bln rupees. 

* The call rate is seen in a range of 6.20-6.70% during the day. (Vidhushi RajPurohit and Richard Fargose)

End

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

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.