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Informist, Monday, Sept. 30, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended slightly below the Reserve Bank of India's standing deposit facility rate of 6.25% today on account of low demand for funds from banks as surplus liquidity remains comfortable after inflows from the month-end spending, dealers said. The call money market rate for one-day loans settled at 6.24%, against 6.50% for three-day loans on Friday.

On Sunday, surplus liquidity in the banking system stood at INR 798.06 billion, slightly up from INR 761.55 billion on Friday. At the beginning of the current fortnight, ending Oct. 4, liquidity slipped into deficit due to the outflow on account of goods and services tax payments. "The deficit amount was narrow enough for the system to return to its surplus mode after the inflows from the month-end spending started," a dealer with a state-owned bank said. "The inflows are expected to continue for a few more days this week."

Market participants expect the total inflows from the salary and pension payments to be around INR 1.5 trillion. "The inflow amount is anticipated to be in the higher range as it is quarter-end, so additional inflow from interest payments is also due," a dealer with another state-owned bank said. The call money rate, after opening at 6.70%, moderated around RBI's repo rate of 6.50%. Meanwhile, the triparty repo rate was trading around 6.70%. "There was activity in the TREPs (triparty repo) market, as some banks had a demand for funds to meet the loan disbursement payments which are scheduled around month-end," a dealer with a state-owned bank said.   

Amid surplus liquidity, banks also deployed their funds towards maintaining cash reserves with the central bank, dealers said. On Sunday, banks' cash balance with the RBI stood at INR 10.23 tln, higher than the average daily requirement for the current fortnight of INR 10.05 tln. "Last week, as the liquidity was in deficit, banks were maintaining lower than the required amount with the RBI," a dealer with a private bank said. "Now, as there is surplus liquidity banks will try to maintain higher reserves with the RBI." The current fortnight is ending on Friday.

At the RBI's four-day, INR 1-tln variable rate reverse repo auction, banks parked only INR 10 bln at the cut-off rate of 6.49%. "The liquidity is in surplus, but it is still in a narrow range, so banks did not participate actively at the VRRR auction," a dealer with a state-owned bank said.

The following are the other highlights:

* The weighted average call rate was 6.68%, against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.63%, against 6.44% on Friday.

* Reversal of the standing deposit facility added INR 283.99 billion to the banking system, while reversal of the marginal standing facility drained INR 12 billion.

OUTLOOK

* On Tuesday, 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 the reserve requirements.

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

CALL RATE

6.24%--Monday's close for one-day loans

6.70%--Monday's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate on demand from banks in early trade

Mumbai – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% on Monday, owing to demand for funds from some banks early in the day to meet their reserve requirements, dealers said. At 0930 IST, the one-day call money rate was at 6.70%, against 6.50% for three-day loans on Friday.

Interbank borrowing rates are likely to ease during the day, as liquidity remains in surplus mode, dealers said.

On Friday, the liquidity surplus in the banking system was INR 761.55 billion, up from INR 443.37 billion on Thursday, according to RBI data. The surplus liquidity would probably have increased further over the weekend, dealers said. "Inflows from government month-end spending might have come during the weekend through the single nodal agency route which allows the money from the government's scheme to enter on holidays as well," a dealer at a state-owned bank said.

Around INR 1.00 trillion to INR 1.45 trillion is the range of total inflow that market participants expect for the month-end spending. Market participants expect the liquidity surplus to increase further in the current fortnight, ending Oct. 4, as salary and pension payments are anticipated to continue for the next few days. Additionally, dealers do not see any outflow lined up in the current week and so, nothing is scheduled to put any burden on liquidity. "Outflow for the excise and tax at source payment will take place around Oct. 6, until that time there is no scheduled outflow to drain the surplus liquidity," a dealer with a private bank said.

After market hours on Friday, the RBI announced a four-day, INR 1-trillion variable rate reverse repo auction to be held from 1030 IST to 1100 IST. Market participants expect bids from banks to be around INR 350 billion. 

On Friday, banks parked INR 10.27 trillion with the RBI against the average daily requirement of INR 10.05 trillion. Last week, banks maintained an average of INR 9.98 trillion with the RBI. 

Following are the other highlights:

* The weighted average call rate was 6.60%, against 6.53% on Friday.

* The weighted average rate for triparty repo was 6.44%, unchanged from Friday.

* Reversal of the standing deposit facility added INR 283.99 billion to the banking system, while reversal of the marginal standing facility drained INR 12 billion.

* 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 Vidhi Verma

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