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Informist, Friday, Sep 27, 2024

By Vidhushi RajPuroht

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate of 6.50% today due to demand for funds from some banks towards the end, as liquidity in the banking system is back in surplus, dealers said. The call money market rate for three-day loans settled at 6.50%, against 6.30% for one-day loans on Thursday. 

"There was limited activity in the money market during the day because of comfortable liquidity at the systemic level," a dealer with a state-owned bank said. "Most banks had no requirement for additional funds owing to lack of significant outflow during the day." Liquidity in the banking system was in a surplus of 443.37 bln rupees on Thursday, against a deficit of 99.58 bln rupees on Wednesday. The liquidity got a boost from the inflow from the government's month-end spending. "Around 500 bln rupees has entered the (banking) system from the month-end spending," a dealer with another state-owned bank said.

On Thursday, banks parked 830.95 bln rupees with the RBI under the standing deposit facility. The amount was sharply higher than what they borrowed under the RBI's marginal standing facility, which stood at 13.7 bln rupees. 

Surplus liquidity is expected to widen further as inflow from salary and pension payments is due to enter the banking system in the next few days. "Market will see inflows totalling 1-trln-rupee from the month-end payment, and it will last until Oct 2," a dealer with a state-owned bank said. "The inflows will be in the higher range as it is quarter-end and hence there will be additional interest payments along with the regular government's spending." Market participants do not see any scheduled outflow in the coming days which could dampen the surplus liquidity for now. 

On Thursday, banks maintained 10.13 trln rupees with the RBI, compared with 10.04 trln rupees on Wednesday. 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 6.53%, against 6.54% on Thursday.

* The weighted average rate for triparty repo was 6.44%, against 6.43% on Thursday.

* Reversal of the standing deposit facility added 830.95 bln rupees to the banking system, while reversal of the marginal standing facility drained 13.70 bln rupees. 

OUTLOOK

* Money markets are shut on Saturday.

* On Monday, the one-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.

* Interbank borrowing rates are seen higher on Monday also as banks will avoid lending funds at the quarter-end.

* During the day, the call rate is seen in a range of 6.20-6.70%, dealers said.

CALL RATE

6.50%--Today's close for three-day loans

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate; liquidity back in surplus mode 

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 0930 IST, the three-day call money rate was at 6.60%, against 6.30% at the close on Thursday for one-day loans. 

Liquidity in the banking system returned to surplus after inflows from the government's month-end spending, dealers said. Systemic liquidity was in a surplus of 443.37 bln rupees on Thursday, compared with a deficit of 99.58 bln rupees on Wednesday.

Market participants are of the view that surplus liquidity will widen further as inflows from salary and pension payments are expected to continue for the next few days. "The liquidity will likely pick up a bit more, as inflows from the month-end spending usually bring in a payment of around 1.50 trln rupees," a dealer with a private bank said. "Outflows for excise and tax at source payments will start around Oct 7... till that time, no other significant outflow is in sight." 

Amid the surplus liquidity in the banking system, market participants expect interbank borrowing rates to ease later in the day. "Liquidity has picked up, and adding to that, no outflows are scheduled for the day, hence banks are in a comfortable position to manage their funding requirements," a dealer at a state-owned bank said. "If the money market rates do rise during the day, it will be because banks might borrow additional funds for their weekend requirements." 

Banks maintained slightly higher-than-required cash balances with the RBI. They maintained 10.13 trln rupees on Thursday, higher than the average daily cash reserve requirement of 10.05 trln rupees for the current fortnight ending Oct 4, according to the data. So far in the current fortnight, except on Thursday and Tuesday, banks have maintained lower cash balances with the RBI. "The liquidity slipped into deficit after outflows for goods and services tax payments, leading the banks to park less amount with the RBI," dealers said. "Now that the liquidity is back in surplus, banks will try to maintain the required amount."

The following are the other highlights:

* The weighted average call rate was 6.60%, as against 6.54% on Thursday.

* The weighted average rate for triparty repo was 6.45%, as compared to 6.43% on Thursday.

* Reversal of the standing deposit facility added 830.95 bln rupees to the banking system, while reversal of the marginal standing facility drained 13.70 bln rupees. 

* The three-day call rate is seen in a range of 6.20-6.60% during the day. (Vidhushi RajPurohit)  

End

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

Edited by Avishek Dutta

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