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Informist, Tuesday, Oct. 29, 2024

By Richard Fargose

MUMBAI - After hovering around the Reserve Bank of India's standing deposit facility of 6.25% for most of the session on Tuesday, the interbank call money rate ended at the repo rate of 6.50% due to demand for funds by some banks towards the end of the session, dealers said.  The one-day call money rate ended at 6.50%, against 6.25% on Monday.

The weighted average call money rate was 6.44% on Tuesday against 6.62% on Monday, as the government's month-end spending improved liquidity in the banking system, easing the demand for funds from banks.

Dealers said the inflows from the government on account of month-end spending have started, and the liquidity surplus will rise steadily this week. On Monday, surplus liquidity in the banking system was INR 849.83 billion, against INR 639.77 billion on Sunday. Dealers said if the tri-party repo rate and call money remain below the repo rate on Wednesday, there is a possibility that the RBI may announce a short-term variable rate reverse repo auction.

Dealers said a rise in currency circulation and demand for credit during the festival season may limit any sharp fall in overnight lending rates. Some dealers said due to strong credit pick-up from non-banking finance companies, the impact of the government's month-end spending flows will not be significant this time. 

On Monday, banks maintained cash reserves of INR 10.10 trillion with the RBI, against INR 10.34 trillion on Sunday. The average daily cash reserve requirement for the fortnight that started on Oct. 19 is INR 10.16 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 6.44%, against 6.62% on Monday.

* The weighted average rate for triparty repo was 6.26%, against 6.43% on Monday.

* Reversal of the standing deposit facility added INR 1.038 trillion to the banking system, while reversal of the marginal standing facility drained INR 16.48 billion.

OUTLOOK

* On Wednesday, 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

6.50%--Tuesday's close for one-day loans

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI repo rate; govt's month-end spend lifts liquidity surplus

By Richard Fargose

MUMBAI – The interbank call money rate was at the Reserve Bank of India's Repo rate of 6.50% on Tuesday due to demand for funds from some banks to meet requirements in early trades, dealers said. At 0930 IST, the one-day call money rate was at 6.50%, against 6.25% at close on Monday.

However, most market participants expect the overnight borrowing rates to ease during the day, as the liquidity surplus widens on account of the government's month-end spending. On Monday, surplus liquidity in the banking system was INR 849.83 billion, against INR 639.77 billion on Sunday. Dealers said as the tri-party repo rate is below the repo rate, there is a possibility that the RBI may announce a short-term variable rate reverse repo auction.

"This time, salary and pension payments by state governments are a bit front-loaded due to Diwali festival," said a dealer with a state-owned bank. "So, if inflows are huge today, and TREPS (tri-party repo rate) falls further, then the RBI may come with a two-day VRRR."

On Monday, banks maintained cash reserves of INR 10.10 trillion with the RBI, against INR 10.34 trillion on Sunday. The average daily cash reserve requirement for the fortnight that started on Oct. 19 is INR 10.16 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 6.50%, against 6.62% on Monday.

* The weighted average rate for triparty repo was 6.29%, against 6.43% on Monday.

* Reversal of the standing deposit facility added INR 1.02 trillion to the banking system, while reversal of the marginal standing facility drained INR 16.48 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 Saji George Titus

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