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Informist, Friday, Oct. 25, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's standing deposit facility of 6.25% Friday as demand for funds from banks eased towards the end of day, dealers said. The three-day call money rate ended at 5.95%, against 6.65% for one-day loans on Thursday.

This week the money market rates traded in a high band owing to reduced surplus liquidity post goods and services tax outflows and the lack of any significant scheduled inflows, dealers said. During this week, outflows for goods and services tax drained around INR 800 billion, following which the weighted average triparty repo rates rose to 6.58% against 6.29% a week ago, dealers said. The surplus liquidity on Thursday was at INR 672.17 billion, against INR 574.28 billion on Wednesday.

To ease the money market rates, the RBI conducted a six-day, INR 250 billion variable rate repo auction. The auction was oversubscribed as RBI received bids totalling INR 487 billion. However, RBI accepted bids of INR 250.05 billion with 17.12% of the allotment made on a pro-rata basis for bids received at the cut-off rate. Bids received above the cut-off rate were allotted in full. The cut-off rate was at 6.55%. 

Dealers said that the aggressive bidding was on expected lines as the triparty repo rate was trading in a high range at the time of the auction. "Banks had a requirement of funds ahead of the upcoming festivals and also to maintain cash reserves with the RBI," a dealer with a state-owned bank said. 

Thursday, banks maintained cash reserves of INR 10.12 trillion with the RBI, against INR 10.18 trillion on Wednesday. The average daily cash reserve requirement for the fortnight that started on Saturday is INR 10.17 trillion. So far, in the current fortnight, banks have maintained an average amount of INR 10.06 trillion with the RBI, thus lower than the required sum. Dealers said that once the inflows from the government's month-end spending start, banks will start maintaining higher cash reserves to make up for the deficit amount.

Following are the other highlights:

* The weighted average call rate was 6.61%, against 6.68% on Thursday.

* The weighted average rate for triparty repo was 6.58%, against 6.66% on Thursday.

* Reversal of the standing deposit facility added INR 660.81 billion to the banking system, while reversal of the marginal standing facility drained INR 68.00 billion.

OUTLOOK

* Money markets are shut on Saturday.

* On Monday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of the 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

5.95%--Friday's close for three-day loans

6.70%--Friday's open for three-day loans

6.65%--Thursday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate; RBI holds a six-day VRR auction

MUMBAI – The interbank call money rate was around the Reserve Bank of India's marginal standing facility rate of 6.75% on Friday, owing to high demand for funds from banks after goods and services tax outflows, dealers said. At 0930 IST, the three-day call money rate was at 6.70%, against 6.65% at close for one-day loans on Thursday.

The surplus liquidity on Thursday was at INR 672.17 billion, against INR 574.28 billion on Wednesday. The RBI announced a six-day, INR 250-billion, variable rate repo auction at 1000-1030 IST on Friday. Market participants expect banks to fully subscribe to the auction and estimate the cut-off at around 6.56%. Dealers attribute the announcement of the auction to the high money market rates in the last few days. "Since the start of the week, money market rates are trading above the RBI's repo rate as the surplus liquidity reduced after the goods and services tax outflows," a dealer with a state-owned bank said. 

Market participants expect money market rates to ease during the day as banks will have funds after Friday's variable rate repo auction and there is an expectation that some inflows from the government's month-end spending will also start. "Major inflows will be there on Monday, but today there are chances of some minor spending to enter the (banking) system," a dealer with a private bank said.

On Thursday, banks maintained cash reserves of INR 10.12 trillion with the RBI, against INR 10.18 trillion on Wednesday. The average daily cash reserve requirement for the fortnight that started on Saturday is INR 10.16 trillion.

Following are the other highlights:

* The weighted average call rate was 6.70%, against 6.68% on Thursday.

* The weighted average rate for triparty repo was 6.58%, against 6.66% on Thursday.

* Reversal of the standing deposit facility added INR 660.81 billion to the banking system, while reversal of the marginal standing facility drained INR 68.00 billion.

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

End

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

Edited by Deepshikha Bhardwaj

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