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Informist, Monday, Oct. 21, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate Monday ended below the Reserve Bank of India's standing deposit facility rate of 6.25% due to an ease in demand for funds from banks towards the end, dealers said. The one-day call money rate ended at 5.75%, against 6.55% for two-day loans on Saturday.

Payment for goods and services tax spiked the interbank borrowing rates during the early trading hours. The call money rate was in the range of 5.10%-6.90%. The tripaty repo rate was also in a high trading band at 6.30%-6.85%. The call money rates eased later in the day due to comfortable surplus liquidity, dealers said.

"The liquidity was in a comfortable range, but still the outflows weighted on the surplus and led to high money market rates," a dealer with a private bank said. "The outflow might be in a range of INR 1 trillion considering the high money market rates." The weighted average call money rate was at RBI's repo rate of 6.50% and the weighted average triparty repo rate was at 6.46%.

Market participants expect the surplus liquidity to narrow down to neutral after the tax outflows. "The surplus might narrow, but it won't stay at that level as the salary and pension payment which is due for month-end will boost the surplus again," a dealer with a state-owned bank said. There are no other scheduled outflows for the week, dealers said. The surplus liquidity on Sunday was at INR 1.52 trillion, against INR 1.47 trillion Saturday.

The average daily cash reserve requirement for the fortnight that began Saturday is INR 10.17 trillion. On Sunday, banks' cash balance with the RBI was INR 10.04 trillion, against INR 10.09 trillion on Saturday. 

The following are the other highlights:

* The weighted average call rate was 6.50%, against 6.23% on Saturday.

* The weighted average rate for triparty repo was 6.46%, against 6.39% on Saturday.

* Reversal of the standing deposit facility added INR 42.59 billion to the banking system, while reversal of the marginal standing facility drained INR 33.50 billion.

OUTLOOK

* On Tuesday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of demand for funds from banks in early trade for 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

6.55%--Saturday's close for two-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate; liquidity surplus to narrow on GST outflows

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 0933 IST, the one-day call money rate was at 6.50%, against 6.55% for two-day loans on Saturday.

During the day, outflow of INR 330 billion is lined up for the payment of gilts auctioned on Friday. Market participants also expect outflows for goods and services tax payment to leave the banking system. "Around INR 700 billion could be the amount for GST payment for today (Monday)," a dealer with a state-owned bank said. Dealers expect the surplus liquidity to fall on account of tax outflows.

"The surplus will be reduced, but liquidity will still likely be in a comfortable range as the surplus is very high according to Friday's data," a dealer with a private bank said. On Friday, the liquidity surplus in the banking system was INR 2.09 trillion, up from INR 1.75 trillion on Thursday, according to RBI data. Meanwhile, the reversal of Friday's three-day, variable rate reverse repo auction will result in an inflow of INR 547.55 billion.

Dealers remain unsure about the probability of a variable rate reverse repo auction. "There are outflows lined up, but the RBI will likely base its decision on the rate at which triparty repo is trading," a dealer with another private bank said. "If the rate is around the RBI's standing deposit facility rate (of 6.25%), then there is a chance of the RBI to conduct a VRRR auction." At 0920 IST, the triparty repo was at 6.39%.

On Friday, banks maintained cash reserve of INR 9.92 trillion with the RBI, against INR 9.85 trillion on Thursday. The average daily cash reserve requirement for the last fortnight that ended on Friday was INR 10.02 trillion and banks maintained an average of INR 10.04 trillion.

Following are the other highlights:

* The weighted average call rate was 6.50%, against 6.23% on Saturday.

* The weighted average rate for triparty repo was 6.37%, against 6.39% on Saturday.

* Reversal of the standing deposit facility added INR 42.59 billion to the banking system, while reversal of the marginal standing facility drained INR 33.50 billion.

* During the day the call rate is seen in a range of 6.20-6.70%. (Vidhushi RajPurohit)

End

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

Edited by Manisha Baxla

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