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Informist, Thursday, Oct. 31, 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 Thursday due to muted demand for funds as the liquidity surplus increased on account of the government's month-end spending, dealers said. The four-day call money rate ended at 5.75%, against 5.80% on Wednesday for one-day loans. Financial markets in India are closed Friday on account of Diwali.

On Wednesday, surplus liquidity in the banking system surged to INR 1.56 trillion, the highest since Oct. 18. On Tuesday, the liquidity surplus was INR 1.01 trillion. Dealers said month-end inflows are front loaded this time as most states have disbursed salaries and staff bonuses before Diwali. State governments mostly pay staff salaries in the first week of the following month.

Around INR 1 trillion is estimated to have come into the banking system this week in the form of salary and pension payouts by the central and state governments.

Owing to the high liquidity surplus, the RBI conducted a 14-day variable rate reverse repo auction for a notified amount of INR 1.75 trillion at 1030-1100 IST. However, banks parked only INR 246.97 billion at the auction. Dealers said banks avoided parking large funds at the variable rate reverse repo auction for longer tenure as excise tax and tax deducted at source outflows are due next week.

Following are the other highlights:

* The weighted average call rate was 6.54%, against 6.40% on Wednesday.

* The weighted average rate for triparty repo was 6.27%, against 6.31% on Wednesday.

* Reversal of the standing deposit facility added INR 1.38 trillion to the banking system, while reversal of the marginal standing facility drained INR 20.05 billion.

OUTLOOK

* Financial markets in India are closed on Friday for Diwali.

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

CALL RATE

5.75%--Thursday's close for four-day loans

6.65%--Thursday's open for four-day loans

5.80%--Wednesday'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; liquidity surplus tops INR 1.5 tln

By Richard Fargose

MUMBAI – The interbank call money rate was above the Reserve Bank of India's Repo rate of 6.50% on Thursday due to demand for funds from a few banks in early trades, dealers said. At 0935 IST, the four-day call money rate was at 6.60% as against 5.80% at close on Wednesday for one-day loans. Financial markets in India will be closed on Friday on account of the Diwali holiday.

On Wednesday, surplus liquidity in the banking system surged to INR 1.56 trillion, against INR 1.01 trillion on Tuesday. Owing to high liquidity surplus, the RBI is conducting a 14-day variable rate reverse repo auction for a notified amount of INR 1.75 trillion at 1030-1100 IST on Thursday. The liquidity surplus widened on account of the government's month-end spending.

Dealers said month-end inflows are front loaded this time as most states have disbursed salaries and staff bonuses before Diwali festival. State government staff salaries come around the first week of the month.

Dealers estimated around INR 1 trillion inflows hitting the banking system this week in the form of salary and pension payouts by the central and state governments.  

Following are the other highlights:

* The weighted average call rate was 6.61%, against 6.47% on Wednesday.

* The weighted average rate for triparty repo was 6.30% as against 6.31% Wednesday.

* Reversal of the standing deposit facility added INR 1.38 trillion to the banking system, while reversal of the marginal standing facility drained INR 20.05 billion.

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

End

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

Edited by Ashish Shirke

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