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Informist, Wednesday, Oct. 16, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate Wednesday ended below the Reserve Bank of India's repo rate of 6.50% as the surplus liquidity in the banking system kept demand for funds from banks subdued, dealers said. The one-day call money rate ended at 6.40%, against 5.75% on Tuesday.

After opening at the RBI's repo rate of 6.50%, the call money rate eased later in the day due to weak demand amid lack of significant outflows, dealers said. The triparty repo rate was below the RBI's repo throughout the day, within the range of 5.90-6.43%. "Since the start of the month, the banking system has been in surplus liquidity, so the rates in the interbank borrowing market have been trading at a moderate level," a dealer with a private bank said.

On Tuesday, the surplus liquidity in the banking system widened to INR 1.60 trillion, from INR 1.50 trillion on Monday. Market participants expect the surplus liquidity to stay in the current range, until the payment for goods and services tax starts. "The GST outflows are there from Monday, other than that there is nothing major weighing on surplus liquidity," a dealer with another private bank said. 

As expected by market participants, RBI announced an overnight, INR 500 billion variable rate reverse repo auction. Banks parked INR 381.33 billion at the auction at the cut-off rate of 6.49%. The participation in the auction was more than Tuesday's two-day variable rate reverse repo auction where banks parked INR 260.60 billion.

"Overnight auctions usually result in greater participation from banks because there is less uncertainty," a dealer with a state-owned bank said. "The triparty repo rate was also low and banks did not have additional pressure to maintain reserve requirements." 

On Tuesday, banks maintained INR 9.97 trillion with the RBI, against INR 9.99 trillion on Monday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. So far, in the current fortnight, banks have maintained an average of INR 10.10 trillion with the RBI.

Following are the other highlights:

* The weighted average call rate was 6.44%, against 6.42% on Tuesday.

* The weighted average rate for triparty repo was 6.28%, against 6.27% on Tuesday.

* Reversal of the standing deposit facility added INR 766.56 billion to the banking system, while reversal of the marginal standing facility drained INR 15.28 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 their reserve requirements.

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

CALL RATE

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

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

5.75%--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's repo rate on demand for funds from banks in early trade

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 0915 IST, the one-day call money rate was at 6.50%, against 5.75% at close on Tuesday.

Dealers do not expect any spike in money market rates during the day. "There has been subdued activity in the call money market due to adequate funds in the banking system," a dealer with a state-owned bank said. "The low interbank borrowing rates have also led the RBI to conduct frequent VRRR (variable rate reverse repo) auctions." Market participants expect the RBI to conduct a variable rate reverse repo auction if money market rates trade lower than the RBI's standing deposit facility rate of 6.25%. At 0915 IST, the triparty repo rate was at 6.29%.

On Tuesday, the liquidity surplus in the banking system was INR 1.60 trillion, up from INR 1.50 trillion on Monday, according to RBI data. Dealers expect the surplus liquidity to remain comfortable for the remaining days of the current fortnight, ending Friday, due to lack of any major outflows. "The surplus will likely narrow from Monday, as the outflows for the payment of goods and services tax starts," a dealer with a private bank said. He added that the surplus might not narrow too much as the government's month-end spending will also start later next week, which will raise the surplus again.  

On Tuesday, banks maintained INR 9.97 trillion with the RBI, against INR 9.99 trillion on Monday. The average daily cash reserve requirement for the current fortnight is INR 10.02 trillion. So far, in the current fortnight, banks have maintained an average of INR 10.10 trillion with the RBI.

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 6.29%, against 6.27% on Tuesday.

* Reversal of the standing deposit facility will add INR 766.56 billion to the banking system, while reversal of the marginal standing facility will drain INR 15.28 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 Ashish Shirke

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