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Informist, Wednesday, Oct. 30, 2024

By Richard Fargose

MUMBAI - The interbank call money rate ended sharply below the Reserve Bank of India's standing deposit facility of 6.25% on Wednesday due to muted demand for funds as the liquidity surplus widened on account of the government's month-end spending, dealers said. The one-day call money rate ended at 5.80%, against 6.50% on Tuesday.

On Tuesday, surplus liquidity in the banking system widened to INR 1.01 trillion, against INR 849.83 billion on Monday. Owing to a high liquidity surplus, the overnight borrowing rates were below the RBI's repo rate for most of the trading on Wednesday.

Dealers estimated around INR 500 billion inflows hit the banking system on Monday-Tuesday in the form of salary and pension payouts by the central and state governments. 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. 

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.  

As the overnight borrowing rates were below the repo rate, the RBI on Wednesday conducted an overnight variable rate reverse repo auction for INR 750 billion. However, banks parked only INR 355.25 billion at a variable rate reverse repo auction. Dealers said as many centres are closed on Thursday for the Diwali festival, banks maintained a high cash balance with them to meet credit disbursement ahead of the extended weekend. 

On Tuesday, banks maintained cash reserves of INR 10.19 trillion with the RBI, against INR 10.10 trillion on Monday. 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 6.40%, against 6.44% on Tuesday.

* The weighted average rate for triparty repo was 6.31%, against 6.26% on Tuesday.

* Reversal of the standing deposit facility added INR 1.22 trillion to the banking system, while reversal of the marginal standing facility drained INR 45.14 billion.

OUTLOOK

* On Thursday, the four-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.

* Financial markets in India will be closed on Friday on account of the Diwali holiday.

* During the day, the call rate is seen in a range of 6.00-6.75%, dealers said.

CALL RATE

5.80%--Wednesday's close for one-day loans

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

6.50%--Tuesday'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; liquidity surplus over INR 1-trln on govt spend
 

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

On Tuesday, surplus liquidity in the banking system widened to INR 1.01 trillion, against INR 849.83 billion on Monday. Owing to high liquidity surplus, most market participants expect the overnight borrowing rates to ease during the day. The liquidity surplus widened on account of the government's month-end spending.

Dealers estimated around INR 500 billion inflows hit the banking system on Monday-Tuesday in the form of salary and pension payouts by the central and state governments.  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. 

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. The weighted average rate for triparty repo was 6.26% at 0950 IST, unchanged from Tuesday.

On Tuesday, banks maintained cash reserves of INR 10.19 trillion with the RBI, against INR 10.10 trillion on Monday. 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 6.41% on Tuesday.

* The weighted average rate for triparty repo was 6.26%, unchanged from Tuesday.

* Reversal of the standing deposit facility added INR 1.22 trillion to the banking system, while reversal of the marginal standing facility drained INR 45.14 billion.

* During the day the call rate is seen in a range of 5.90-6.75%. (Richard Fargose)

End

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

Edited by Manisha Baxla

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