More Stories

Informist, Monday, Nov. 4, 2024

By Vidhushi RajPurohit

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's standing deposit facility of 6.25% Monday as the demand for funds from banks remained subdued owing to comfortable surplus liquidity in the banking system, dealers said. The one-day call money rate ended at 5.75%, unchanged from four-day loans on Thursday.

Sunday, the surplus liquidity in the banking system was at INR 1.65 trillion, against INR 1.59 trillion on Saturday. Inflows from the government's month-end spending resulted in the widening of the surplus, dealers said. Around INR 1.00 trillion is estimated by the market participants to have entered the banking system by way of month-end inflows. "The inflows from the salary and pension payments were on the higher side due to additional festive bonuses," a dealer with a private bank said.

The call money rate, after opening at the RBI's repo rate of 6.50%, was around the RBI's SDF rate for the majority of the trading hours. Dealers attributed the fall in rates to lack of significant outflows and adequate funds with the banks. "The surplus liquidity got a boost after the month-end spending and until the outflows for the TDS (tax deducted at source) and excise duty payment starts, banks do not need to borrow aggressively at the money market," a dealer with a state-owned bank said. "Even when the outflows start, the amount is not that major for the rates to hike significantly," the dealer added. Market participants expect the outflows for the tax deducted at source and excise duty payment to be around INR 500 billion. 

In line with market participants' expectations, the RBI conducted a three-day, INR 1.75 trillion variable rate reverse repo auction. Banks parked INR 750.00 billion at the auction at the cut-off rate of 6.49%. "The triparty repo rates were low and banks do not have any urgent need of funds, so it was a good opportunity for them to park funds at 6.49%, when the triparty repo rate was around 6.25%," a dealer with a state-owned bank said. The weighted average triparty repo rate for the day was at 6.08%.

Sunday, banks maintained cash reserves of INR 10.45 trillion with the RBI, against INR 10.51 trillion on Saturday. The average daily cash reserve requirement for the fortnight that started on Saturday is INR 10.12 trillion. 

Following are the other highlights:

* The weighted average call rate was 6.41%, against 6.54% on Thursday.

* The weighted average rate for triparty repo was 6.08%, against 6.27% on Thursday.

* Reversal of the standing deposit facility added INR 988.17 billion to the banking system, while reversal of the marginal standing facility drained INR 18.49 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

5.75%--Monday's close for one-day loans

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

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate on demand from banks in early trade

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% on Monday due to demand for funds from a few banks in early trades to meet the reserve requirements, dealers said. At 0915 IST, the one-day call money rate was at 6.50%, against 5.75% at close on Thursday for four-day loans. Financial markets in India were closed on Friday on account of the Diwali holiday.

Market participants were of the view that the interbank borrowing rates will ease later in the day, owing to comfortable surplus liquidity in the banking system. "Banks have sufficient funds and there is no major scheduled outflow lined up for the day to hike up the money market rates," a dealer with a private bank said. Few dealers also expect inflows from the government's month-end spending to continue Monday. "Major inflows from the salary and pension payments have already taken place, but there is a slight probability for some staggered inflows to continue today as well," a dealer with another private bank said.

On Thursday, surplus liquidity in the banking system was at INR 1.54 trillion, against INR 1.56 trillion on Wednesday. The liquidity surplus widened last week owing to an inflow of around INR 1.00 trillion from salary and pension payments, dealers said. Market participants expect the RBI to announce a short-tenure variable rate reverse repo auction during the day to keep overnight rates from falling sharply. "The decision to conduct a VRRR auction will be based on the triparty repo rate. If it falls below the RBI's SDF (standing deposit) rate then the RBI might announce a short-tenure auction," a dealer with a state-owned bank said. 

At Thursday's 14-day variable rate reverse repo auction for a notified amount of INR 1.75 trillion, banks only parked INR 246.97 billion. "Banks avoided parking large funds as the reversal day of the auction is after the upcoming outflows for tax deducted at source and excise duty payments," a dealer with a state-owned bank said. Dealers expect the outflows for tax deducted at source and excise duty payments to take place around Thursday.

On Thursday, banks maintained INR 10.44 trillion with the RBI as cash reserves, against INR 10.40 trillion maintained on Wednesday. The average daily cash reserve requirement for the last fortnight that ended on Friday was INR 10.17 trillion and, till Thursday, banks maintained an average of INR 10.21 trillion.  

Following are the other highlights:

* The weighted average call rate was 6.50%, against 6.54% on Thursday.

* The weighted average rate for triparty repo was 6.25%, against 6.27% Thursday.

* Reversal of the standing deposit facility will add INR 188.15 billion to the banking system, while reversal of the marginal standing facility will drain INR 12.77 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 Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.