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Informist, Monday, Oct. 14, 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 amid comfortable liquidity in the banking system, dealers said. The one-day call money rate ended at 5.75%, against 5.85% for three-day loans on Friday.

The trade in the interbank borrowing market remained tepid due to surplus liquidity and lack of significant outflows, dealers said. "There was no major movement in the banking system liquidity and banks did not have any need to seek additional funds, so the money market rates were on the lower side," a dealer with a state-owned bank said. The surplus systemic liquidity increased to INR 1.83 trillion on Sunday from INR 1.80 trillion on Friday, according to RBI data. 

Market participants expect the liquidity distribution in the banking system will be skewed in the latter part of this week due to Hyundai Motor India's initial public offering. Hyundai Motor India’s INR 278.70 bln IPO, the biggest equity public offering yet in the country, is set to open on Tuesday and close on Thursday. "The major outflow for IPOs usually takes place on the last date for any IPO," a dealer with another state-owned bank said. 

On account of high surplus liquidity and lower money market rates, the RBI announced a four-day, INR 750 billion variable rate reverse repo auction. Banks parked INR 240.70 billion at the auction at the cut-off rate of 6.49%. "Banks did not bid a higher amount because they did not want to park funds with the RBI ahead of IPO outflows," a dealer with a private bank said. "There will be outflows for loan disbursements, so banks will need funds for that as well."

The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. On Sunday, banks maintained INR 9.87 trillion with the RBI, against INR 9.90 trillion on Friday. 

The following are the other highlights:

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

* The weighted average rate for triparty repo was 6.24%, against 6.25% on Friday.

* Reversal of the standing deposit facility added INR 831.65 billion to the banking system, while reversal of the marginal standing facility drained INR 3.60 billion.

OUTLOOK

* On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% because of the 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%--Monday's close for one-day loans

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

5.85%--Friday's close for three-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 Monday, owing to demand for funds from some banks early in the day to meet their reserve requirements, dealers said. At 0920 IST, the one-day call money rate was at 6.50%, against 5.85% at close for three-day loans on Friday.

On Friday, the liquidity surplus in the banking system was INR 1.80 trillion, up from INR 1.34 trillion on Thursday, according to RBI data. "There was no major inflow, and the reversal of VRRR (variable rate reverse repo) auction and likely some other minor inflows which is usual on Fridays could have widened the surplus liquidity," a dealer with a private bank said. Inflows from the reversal of two variable rate reverse repo auctions amounted to INR 462.23 billion and additionally, there was an inflow of INR 244.53 billion from the buyback auction for government securities, dealers said.

During the day, payment for gilts auctioned on Friday will result in an outflow of INR 290 billion. Reversal of Friday's three-day variable rate reverse repo auction will bring in an inflow of INR 452.60 billion into the banking system.

Dealers expect interbank borrowing rates to ease during the day, as liquidity remains in surplus. "RBI might conduct a short-tenure VRRR auction if the triparty reo rate continues to trade below the RBI's repo rate," a dealer with a state-owned bank said. AT 0920 IST, the triparty repo rate was at RBI's standing deposit facility rate of 6.25%. 

Market participants expect banks not to bid a high amount at the variable rate reverse repo auction, if there is one. "Payment for IPO (initial public offering) will likely start from tomorrow, so banks might not want to lock up their funds at VRRR auction," a dealer at a private bank said. Hyundai Motor India's IPO will open for public subscription on Tuesday. The company is aiming to raise INR 278.70 billion from the IPO, and it is termed by the market as the most significant public issue in India.

On Friday, banks maintained INR 9.90 trillion with the RBI, against INR 10.09 trillion on Thursday. The average daily cash reserve requirement for the last fortnight that ended on Friday was INR 10.02 trillion.

Following are the other highlights:

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

* The weighted average rate for triparty repo was 6.27%, against 6.25% on Friday.

* Reversal of the standing deposit facility added INR 228.55 billion to the banking system, while reversal of the marginal standing facility drained INR 12.56 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 Saji George Titus

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