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Informist, Tuesday, Oct. 15, 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%, unchanged from Monday.

During the day, banks did not have any significant outflows, dealers said. "There was enough surplus liquidity and hence no additional requirement for funds," a dealer with a private bank said. "So the money market rates were below the RBI's repo rate (6.50%)." The weighted average rate for call money market was 6.42%. The weighted average triparty repo rate was 6.27%. "Mutual funds are the major lenders in the TREPs (triparty repo) market, and they have adequate funds, which led to lower rates in TREPs as compared to the call money market," a dealer with a state-owned bank said.

On Monday, the liquidity surplus was INR 1.50 trillion, down from INR 1.83 trillion on Sunday. The lower rate in the interbank borrowing market and surplus liquidity in the banking system led the RBI to conduct a two-day variable rate reverse repo auction. The auction was for INR 500 billion, and it is due for reversal on Thursday.

Banks parked INR 260.60 billion at the auction at the cut-off rate of 6.49%. Dealers said the participation of banks at the auction was on expected lines as they had already parked funds at Monday's variable rate reverse repo auction as well. Banks parked INR 240.70 billion at Monday's four-day variable rate reverse repo auction. 

The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. On Monday, banks had maintained INR 9.99 trillion with the RBI, against INR 9.87 trillion on Sunday.

Following are the other highlights:

* The weighted average call rate was 6.42%, unchanged from Monday.

* The weighted average rate for triparty repo was 6.27%, against 6.24% on Monday.

* Reversal of the standing deposit facility added INR 944.87 billion to the banking system, while reversal of the marginal standing facility drained INR 19.82 billion.

OUTLOOK

* On Wednesday, 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 their reserve requirements.

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

CALL RATE

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

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At repo rate; banks' demand to ease on comfortable liquidity

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% on Tuesday, owing to demand for funds from banks in early trade to meet reserve requirements, dealers said. At 0915 IST, the one-day call money rate was at 6.50%, against 5.75% at close on Monday.

Market participants see the possibility of the RBI conducting a three-day variable rate reverse repo auction if money market rates trade around the RBI's standing deposit facility of 6.25%. "The liquidity surplus is in a comfortable range and banks have been maintaining adequate reserves with the RBI," a dealer with a state-owned bank said. "So, the rates will likely trade at a lower level during the day." At 0915 IST, the triparty repo rate was at 6.25%. 

"RBI might conduct VRRR auctions till the weekend as banks do not have any significant requirement for funds due to the absence of major outflow," a dealer with another state-owned bank said. Dealers expect outflows from payment of goods and services tax to start from Monday. "The payment for GST will likely not have a major impact on the surplus liquidity because of the frequent inflows from the government's spending," a dealer with a private bank said. The surplus liquidity on Monday was at INR 1.50 trillion, down from INR 1.83 trillion on Sunday. 

At Monday's four-day, INR 750-billion variable rate reverse repo auction, banks parked INR 240.70 billion at a cut-off rate of 6.49%. "Locking up funds for four days creates a bit of uncertainty for the banks as they do not know where the money market rates will be trading at," a dealer with a state-owned bank said. Dealers also attributed the tepid participation at the auction to the ongoing initial public offering of Hyundai Motor India. 

Hyundai Motor India's INR 278.70-billion IPO, the biggest equity public offering yet in the country, opened Tuesday and will close on Thursday. Market participants expect the liquidity distribution in the banking system to be skewed in the latter part of this week due to Hyundai Motor India's initial public offering.

On Monday, banks maintained INR 9.99 trillion with the RBI, against INR 9.87 trillion on Sunday. The average daily cash reserve requirement for the current fortnight, ending Friday, is INR 10.02 trillion. 

Following are the other highlights:

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

* The weighted average rate for triparty repo was 6.26%, against 6.24% on Monday.

* Reversal of the standing deposit facility will add INR 944.87 billion to the banking system, while reversal of the marginal standing facility will drain INR 19.82 billion.

* The call rate is seen in a range of 6.20-6.60% during the day. (Vidhushi RajPurohit)

End

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

Edited by Ashish Shirke

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