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Informist, Thursday, Oct. 10, 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% because of low demand for funds from banks, given the comfortable liquidity in the banking system, dealers said. The one-day call money rate ended at 5.75%, against 6.24% on Wednesday.

After opening at the RBI's repo rate of 6.50%, the call money market rate hovered in the range of 5.10%-6.50%. Activity in the money market remained tepid as banks have comfortable surplus liquidity, dealers said. "The call money rate was even below the standing deposit facility rate (6.25%) during certain trading hours," a dealer with a private bank said. "Still, the RBI did not intervene with a variable rate reverse repo auction because the surplus liquidity narrowed a bit on Wednesday."

On Wednesday, the liquidity surplus was at INR 1.29 trillion, against INR 1.61 trillion on Tuesday, according to RBI data. Dealers cited regular minor outflows as the reason for the reduction in the surplus amount. "No major outflows are there in the current fortnight, so the surplus will likely remain comfortable," a dealer with a state-owned bank said.

On Friday, inflows of INR 244.53 billion will enter the banking system from the buyback of five government securities. The total amount for the auction was INR 250 billion and the central bank received offers of INR 619.14 billion. Inflows from the reversal of two variable rate reverse repo auctions will also bring in an inflow of INR 462.23 billion Friday.

Banks maintained INR 10.00 trillion with the RBI as cash reserves, against INR 9.88 trillion Tuesday. 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%, unchanged from Wednesday.

* The weighted average rate for tri-party repo was 6.30%, against 6.26% on Wednesday.

* Reversal of the standing deposit facility added INR 531.02 billion to the banking system, while reversal of the marginal standing facility drained INR 40.85 billion.

OUTLOOK

* On Friday, the three-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

5.75%--Thursday's close for one-day loans

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate on demand for funds from banks early in trade 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% Thursday owing to demand for funds early in the day from some banks to meet their reserve requirements, dealers said. At 0930 IST, the one-day call money rate was at 6.50%, against 6.24% at close on Wednesday.

On Wednesday, the liquidity surplus in the banking system was INR 1.29 trillion, down from INR 1.61 trillion on Tuesday, according to RBI data. Dealers said there were no major outflows on Wednesday except the payment of INR 187 billion for the state-government securities which were auctioned on Wednesday. "Some minor outflows of regular nature might have led to the narrowing of surplus liquidity," a dealer with a state-owned bank said. 

Banks Wednesday slightly increased the cash reserve maintained with the RBI. They maintained INR 10.00 trillion with the RBI, against INR 9.88 trillion on Tuesday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion.

Market participants expect the RBI to continue along the same lines in its fine-tuning operations to manage the banking system liquidity. "The MPC (Monetary Policy Committee) decision will not have any change in the interbank borrowing market or even the liquidity condition," a dealer with another state-owned bank said. On Wednesday, the rate-setting panel kept the policy rates steady and but changed the policy stance to 'neutral' from 'withdrawal of accommodation', which was expected lines. Dealers are of the view that the RBI will continue to conduct variable rate repo and variable rate reverse repo auctions with the same frequency as it has been conducting in recent months.

No significant outflows or inflows are lined up for the day. "The money market rates will likely trade below the RBI's repo rate for the majority of the trading hours," a dealer with a private bank said.

The following are the other highlights:

* The weighted average call rate was 6.50%, against 6.43% on Wednesday.

* The weighted average rate for triparty repo was 6.28%, against 6.26% on Wednesday.

* Reversal of the standing deposit facility added INR 531.02 billion to the banking system, while reversal of the marginal standing facility drained INR 40.85 billion.

* The call rate is seen in a range of 6.20-6.70% during the day.

End

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

Edited by Rajeev Pai

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