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Informist, Monday, Oct. 28, 2024

By Richard Fargose

MUMBAI - The interbank call money rate ended at the Reserve Bank of India's standing deposit facility of 6.25% Monday as the government's month-end spending improved liquidity in the banking system, thereby, easing demand for funds from banks, dealers said. The one-day call money rate ended at 6.25%, against 5.95% for three-day loans on Friday.

Dealers said the inflows from the government on account of month-end spending have started, and liquidity surplus will rise steadily this week. "Due to the Diwali festival, month-end inflows will be front loaded. Some states have started disbursing salaries, which generally comes around the first week of the month," said a dealer with a large state-owned bank. "There were some inflows on Friday and Saturday also." Market participants estimate around INR 200 billion-INR 400 billion inflows hit the banking system on Monday.

The liquidity surplus was narrowed last week after goods and services tax outflows and the lack of any significant scheduled inflows. During last week, outflows for goods and services tax drained around INR 800 billion, dealers said. The surplus liquidity on Sunday was at INR 639.77 billion, against INR 489.07 billion on Friday.

Sunday, banks maintained cash reserves of INR 10.34 trillion with the RBI, against INR 10.38 trillion on Saturday. 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 10.18 trillion with the RBI.

Following are the other highlights:

* The weighted average call rate was 6.62%, against 6.61% on Friday.

* The weighted average rate for triparty repo was 6.43%, against 6.58% on Friday.

* Reversal of the standing deposit facility added INR 836.64 billion to the banking system, while reversal of the marginal standing facility drained INR 25.16 billion.

OUTLOOK

* On Tuesday, 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 6.00-6.75%, dealers said.

CALL RATE

6.25%--Monday's close for one-day loans

6.75%--Monday's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's MSF rate; govt's month-end spend to boost liquidity

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility rate of 6.75% on Monday, owing to firm demand for funds from banks to meet requirements, dealers said. At 0930 IST, the one-day call money rate was at 6.75%, against 5.95% at close for three-day loans on Friday.

Dealers attribute rise in currency circulation and demand for credit during the festival season for the firm demand for funds. "Month-end flows will start from today, but this is Diwali week, so hence demand for funds will remain strong," said a dealer with a large state-owned bank. "Especially, credit pick-up from NBFCs (non-banking finance companies) is on rise."

On Friday, surplus liquidity in the banking system was INR 489.07 billion, against INR 672.17 billion on Thursday. Dealers said as tri-party repo rate is hovering around the repo rate, there is a lesser possibility that the RBI will announce a short-term variable rate repo auction.

"Since the TREPS (tri-party repo) rates are at 6.50%, and month-end spending will start coming from today, I don't see chances of VRR," said a dealer with another state-owned bank. Market participants expect money market rates to ease during the day on expectation of inflows from the government's month-end spending. 

On Friday, banks maintained cash reserves of INR 10.05 trillion with the RBI, against INR 10.12 trillion on Thursday. 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 6.75%, against 6.61% on Friday.

* The weighted average rate for triparty repo was 6.53%, against 6.58% on Friday.

* Reversal of the standing deposit facility added INR 82.39 billion to the banking system, while reversal of the marginal standing facility drained INR 19.28 billion.

* During the day the call rate is seen in a range of 6.20-6.75%. (Richard Fargose)

End

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

Edited by Akul Nishant Akhoury

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