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Informist, Thursday, Sep 26, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's repo rate of 6.50% today on account of low demand for funds from banks as the liquidity deficit in the banking system narrowed due to inflows from government month-end spending, dealers said. The call money market rate for one-day loans settled at 6.30% today, as against 5.75% on Wednesday.

The liquidity deficit in the banking system narrowed to 99.58 bln rupees on Wednesday from 263.82 bln rupees on Tuesday, according to RBI data. The inflows from government month-end spending started arriving early this time against the market expectation of them starting around the last day of September, a dealer at a state-owned bank said. 

As the deficit liquidity has started to narrow, banks increased amounts parked with the RBI under the standing deposit facility. According to RBI data, banks parked 835.82 bln rupees with the central bank under the SDF on Wednesday, against 623.81 bln rupees on Tuesday. Banks borrowed 55.49 bln rupees from the RBI's marginal standing facility on Wednesday, as against 14.24 bln rupees on the previous day. "Despite the deficit, the amounts parked at SDF has remained greater than the amount borrowed through the MSF," a dealer with a private bank said. "This shows that banks still had adequate funds, and they were expecting the deficit to ease soon."

Market participants expect the deficit to reduce further this week and soon move back to surplus. "Most likely the (banking) system's liquidity will be in surplus from next week," a dealer with another state-owned bank said. The interbank borrowing rates were also moderate during the day. After opening at 6.60%, the call money rate was below the RBI's SDF rate of 6.25% for most of the day. "Banks did not have any significant outflows and the inflows from the quarter-end payments also aided the banks to manage their funding requirements," a dealer with a private bank said.

On Wednesday, banks maintained 10.04 trln rupees with the RBI, compared with 10.23 trln rupees on Tuesday. For the current fortnight, ending Oct 4, 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 6.54%, against 6.68% on Wednesday.

* The weighted average rate for triparty repo was 6.43%, against 6.49% on Wednesday.

* Reversal of the standing deposit facility added 835.82 bln rupees to the banking system, while reversal of the marginal standing facility drained 55.49 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 in early trade 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

6.30%--Today's close for one-day loans

6.60%--Today's open for one-day loans

5.75%--Wednesday'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 deficit narrows on govt spend 

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 banks early in the day to meet their reserve requirements, dealers said. At 0920 IST, the one-day call money rate was at 6.60%, against 5.75% at close on Wednesday.

On Wednesday, the liquidity deficit in the banking system was at 99.58 bln rupees, against 263.82 bln rupees on Tuesday, according to RBI data. The liquidity deficit narrowed on account of likely inflows from the government's month-end spending, dealers said. "Inflows from salary and pension payments have most likely started, and they will continue for the next few days," a dealer at a private bank said. "The deficit liquidity will soon return to the surplus level as the month-end spending starts reflecting in its entirety in the (banking) system."

Market participants are of the view that interbank borrowing rates might ease in the latter half of the day, providing that there is no sudden outflow seen in the banking system. "There are no scheduled outflows for the day, so there are chances of the money market rates to trade at a moderate level," a dealer with a state-owned bank said. "The deficit has narrowed to an almost neutral level, so banks do not have any urgent need to borrow aggressively at the money market."

Today, the reversal of the two-day, 500-bln-rupee variable rate repo auction will result in an outflow of 500.03 bln rupees from the banking system. Dealers do not expect the RBI to announce a variable rate repo auction owing to adequate funds and lack of scheduled outflow during the day. "Unless the TREPs (triparty repo rate) shoots up owing to sudden outflow, RBI would probably not conduct a VRR(variable rate repo) auction," a dealer with a private bank said.

On Wednesday, banks maintained 10.04 trln rupees with the RBI, compared with 10.23 trln rupees on Tuesday. 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 6.63%, against 6.68% on Wednesday.

* The weighted average rate for triparty repo was 6.47%, against 6.49% on Wednesday.

* Reversal of the standing deposit facility added 835.82 bln rupees to the banking system, while reversal of the marginal standing facility drained 55.49 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 Saji George Titus

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