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Informist, Thursday, Oct. 17, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate Thursday ended below the Reserve Bank of India's standing deposit facility rate of 6.25% 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 5.75%, against 6.40% Wednesday.

Market participants also said the activity in the money market was tepid because of a lack of major scheduled outflows. "This fortnight (ending Friday) there has been hardly any need for banks to borrow additional funds because the liquidity has remained in high surplus and (there are) no outflows to pull it down," a dealer with a state-owned bank said. On Wednesday, the liquidity surplus in the banking system was INR 1.90 trillion, up from INR 1.60 trillion Tuesday, data from the RBI showed.

Banks were seen lending at the tri-party repo rate, which picked up the volume of trades in the market, dealers said. "It is usual for the volume in the tri-party repo market to go up ahead of the reporting Friday," a dealer with a private bank said. "Banks want to deploy their excess funds so that it does not hike up the cash reserve requirements for the next fortnight."

The average daily cash reserve requirement for the fortnight ending Friday is INR 10.02 trillion. On Wednesday, banks maintained INR 9.76 trillion with the RBI, against INR 9.97 trillion Tuesday. So far, in the current fortnight, banks have maintained an average of INR 10.07 trillion.

The RBI conducted an overnight variable rate reverse repo auction of INR 750 billion. Banks parked INR 403.85 billion at the auction, at a cut-off rate of 6.49%. During the day, the reversal of two variable rate reverse repo auctions resulted in an inflow of INR 641.93 billion. 

The following are the other highlights:

* The weighted average call rate was 6.43%, against 6.44% Wednesday.

* The weighted average rate for tri-party repo was 6.28%, unchanged from Wednesday.

* Reversal of the standing deposit facility added INR 738.58 billion to the banking system, while reversal of the marginal standing facility drained INR 58.72 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 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%--Thursday's close for one-day loans

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

6.40%--Wednesday'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' fund demand to ease as liquidity surplus up

MUMBAI – The interbank call money rate opened 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 6.40% at close on Wednesday.

On Wednesday, the liquidity surplus in the banking system was INR 1.90 trillion, up from INR 1.60 trillion on Tuesday, according to RBI data. Dealers said there were no scheduled inflows on Wednesday except the redemption amount of INR 140.5 billion for the state-government securities. Some dealers attributed the increase in the surplus amount to likely inflows ahead of the payment of goods and services tax. "There was nothing significant in terms of inflow on Wednesday, and the collection of GST usually begins a few days in advance of the tax outflow date," a dealer with a private bank said. 

The outflow for the goods and services tax payment is scheduled for Monday, dealers said. "It is difficult to ascertain the amount of tax outflows, but it might be in the range of INR 700 billion to INR 800 billion," a dealer with a state-owned bank said. Market participants expect the outflow for the tax payment to not have a major impact on the liquidity condition due to the anticipated inflows from the government's month-end spending. "Even if there is a narrowing of liquidity from the tax outflows, the inflows from the salary and pension payments will boost the surplus again," a dealer with another state-owned bank said.

Dealers expect the interbank borrowing rates to ease, owing to comfortable surplus liquidity and lack of a major outflow during the day. "The rates will ease, and the RBI might conduct an overnight VRRR (variable rate reverse repo) auction," a dealer with a private bank said. Reversal of two variable rate reverse repo auction will bring in a total inflow of INR 641.93 billion into the banking system.

Banks Wednesday maintained INR 9.76 trillion with the RBI, against INR 9.97 trillion on Tuesday. The average daily cash reserve requirement for the current fortnight, ending Friday, is INR 10.02 trillion. 

The following are the other highlights:

* The weighted average call rate was 6.50%, against 6.44% on Wednesday.

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

* Reversal of the standing deposit facility will add INR 738.58 billion to the banking system, while reversal of the marginal standing facility will drain INR 58.72 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 Rajeev Pai

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