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Informist, Friday, Oct. 11, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 6.25% due to low demand for funds from banks, dealers said, adding that demand from banks was low due to comfortable liquidity in the banking system. The three-day call money rate ended at 5.85%, against 5.75% for one-day loans on Thursday.

The interbank borrowing rates were below the RBI's repo rate of 6.50% for the majority of the trading hours. "The movement in the money market stayed tepid as expected," a dealer with a state-owned bank said. "There was practically no significant outflow and, additionally, the surplus liquidity was quite sufficient." Thursday, the liquidity surplus increased slightly to INR 1.34 trillion, from INR 1.29 trillion on Wednesday, according to RBI data. 

RBI conducted a three-day, INR 750 billion variable rate reverse repo auction, dealers said. Reversal of two variable rate reverse repo auctions and the low money market rates prompted the RBI to conduct the auction, dealers said. Banks parked INR 452.60 billion at the auction at the cut-off rate of 6.49%. "The bids were on the expected lines as ahead of the weekend, banks could afford to lock up their funds," a dealer with a private bank said. "The triparty repo rate was also quite low, so banks essentially had a good opportunity to lend their idle funds to the RBI at better rate." The weighted average triparty repo rate was at the RBI's standing deposit facility rate of 6.25%. 

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. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. Thursday, banks maintained INR 10.09 trillion with the RBI, slightly up from INR 10.00 trillion on Wednesday. 

The following are the other highlights:

* The weighted average call rate was 6.43%, same as on Thursday.

* The weighted average rate for triparty repo was 6.25%, against 6.30% on Thursday.

* Reversal of the standing deposit facility added INR 566.56 billion to the banking system, while reversal of the marginal standing facility drained INR 21.80 billion.

OUTLOOK

* Money market is shut on Saturday.

* On Monday, 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

5.85%--Friday's close for three-day loans

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

5.75%--Thursday'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 from some banks in early trade 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% Friday owing to demand for funds early in the day from some banks to meet their reserve requirements, dealers said. At 0920 IST, the three-day call money rate was at 6.50%, against 5.75% at the close on Thursday for one-day loans.

On Thursday, the liquidity surplus in the banking system was INR 1.34 trillion, slightly higher than INR 1.29 trillion on Wednesday, according to RBI data. Market participants do not expect any major movement in the interbank borrowing rates. "The liquidity condition is largely stable in the banking system with some minor variations, which is usual for the first few weeks of a new quarter," a dealer with a state-owned bank said. "Movement will likely begin from next weeks, as the disbursement payments will start building up."

On Thursday, banks increased the cash reserves maintained with the RBI. They maintained INR 10.09 trillion with the RBI, against INR 10.00 trillion on Wednesday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. "Banks have sufficient surplus funds, so they want to maintain higher reserves," a dealer with a private bank said. "If some sudden outflows are there, towards the end of the current fortnight, then they will have less burden to maintain reserve requirements."

Reversal of two variable rate reverse repo auctions is scheduled to result in an inflow of INR 462.23 billion into the banking system on Friday. Inflows of INR 244.53 billion from Thursday's buyback auction for government securities is also scheduled for the day. 

At 0920 IST, the triparty repo rate was at the RBI's standing deposit facility rate of 6.25%. Some dealers expect that the RBI may announce a short-tenure variable rate reverse repo auction if borrowing rates remain below the RBI's repo rate.

Following are the other highlights:

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

* The weighted average rate for triparty repo was 6.27%, against 6.30% on Thursday.

* Reversal of the standing deposit facility added INR 566.56 billion to the banking system, while reversal of the marginal standing facility drained INR 21.80 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 Akul Nishant Akhoury

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