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Informist, Wednesday, Oct. 9, 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% due to low demand for funds from banks owing to comfortable liquidity in the banking system, dealers said. The one-day call money rate ended at 6.24%, against 6.40% on Tuesday.

The money market rates were subdued as banks did not have high demand for funds in the absence of significant outflows, dealers said. "Currently, the (banking) system has sufficient surplus funds, so the demand in the money market was moderate," a dealer with a private bank said. On Tuesday, the liquidity surplus increased slightly to INR 1.61 trillion from INR 1.57 trillion on Monday, according to RBI data. 

In the monetary policy announcement, the rate-setting panel kept the policy rates unchanged and, on the lines of market participants' expectations, changed the policy stance to 'neutral' from 'withdrawal of accomodation'. "The result of this MPC meeting will not have a major impact on money market operations as policy rates and the stance on liquidity management was kept the same," a dealer with a state-owned bank said.

Dealers expect the RBI to continue with regular variable rate repo and variable rate reverse repo auctions to manage the banking system's liquidity. "As the RBI's governor Shaktikanta Das announced, the central bank will try to keep the money market rates near the policy repo rate," a dealer with another state-owned bank said. "So, the frequency of VRRs and VRRRs auctions will likely remain at the same level." 

On Tuesday, banks maintained INR 9.88 trillion with the RBI, against INR 10.27 trillion on Monday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion.

The following are the other highlights:

* The weighted average call rate was 6.43%, against 6.42% on Tuesday.

* The weighted average rate for triparty repo was 6.26%, against 6.21% on Tuesday.

* Reversal of the standing deposit facility added INR 887.39 billion to the banking system, while reversal of the marginal standing facility drained INR 53.08 billion.

OUTLOOK

* On Thursday, the one-day call money rate may open near the RBI's repo rate of 6.50% because of demand for funds from banks to meet reserve requirements.

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

CALL RATE

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

6.50%--Wednesday's open for one-day loans

6.40%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI repo rate on demand from some bks; liquidity comfortable 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% on Wednesday, 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 6.50%, against 6.40% at close on Tuesday.

On Tuesday, the liquidity surplus in the banking system was INR 1.61 trillion, slightly up from INR 1.57 trillion on Monday, according to RBI data. Dealers expect the surplus liquidity to remain comfortable for the remaining days of the current week due to lack of any major outflows.

Interbank borrowing rates are likely to remain at and below the repo rate as liquidity continues to be in surplus, dealers said. "Banks have been maintaining adequate reserves with the RBI and the surplus liquidity is also in a comfortable range," a dealer at a state-owned bank said. During the day, INR 187 billion will leave the banking system as payments for state government securities auctioned on Tuesday, dealers said. "The outflow for the payment of state government securities is not a major amount and other than that there is no scheduled outflow lined up for the day," a dealer at a private bank said.

A short while from now, RBI Governor Shaktikanta Das will announce the rate-setting panel's decision. Market participants expect the Monetary Policy Committee to keep the policy rates unchanged and change the policy stance to "neutral" from "withdrawal of accommodation". "The decision on liquidity will be keenly watched out for by banks," a dealer with another private bank said. "Other than that, the MPC will likely not have a major impact on the money market operations during the day."

Some dealers expect the RBI to conduct a short-tenure variable rate reverse repo auction, if the money market rates are below the RBI's repo rate. "Banks might participate at the auction if it is an overnight auction," a dealer with a state-owned bank said.

On Tuesday, banks maintained INR 9.88 trillion with the RBI, against INR 10.27 trillion on Monday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion.

Following are the other highlights:

* The weighted average call rate was 6.50%, against 6.42% on Tuesday.

* The weighted average rate for triparty repo was 6.24%, against 6.21% on Tuesday.

* Reversal of the standing deposit facility added INR 887.39 billion to the banking system, while reversal of the marginal standing facility drained INR 53.08 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 Avishek Dutta

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