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Informist, Tuesday, Nov. 5, 2024

 

By Vidhushi RajPurohit

 

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 6.25% as demand for funds from banks remained muted owing to high surplus liquidity in the banking system, dealers said. The one-day call money rate ended at 5.95%, against 5.75% on Monday.

 

Both the volumes and rates in the overnight market remained low because of the low requirement for funds. "With no outflow scheduled for the day and a high surplus, there was nothing significant to hike up the (money market) rates," a dealer with a state-owned bank said. The weighted average rate for the tri-party repo rate was at 6.10%, whereas for call money the weighted average rate was at 6.32%. 

 

Surplus liquidity on Monday increased to INR 2.76 trillion from INR 1.65 trillion Sunday. Inflows from month-end spending by the government and redemption of the 6.18%, 2024 gilt widened the surplus, dealers said. "The inflows from salary and pension payments were on the higher side for October because there were additional payments for festival bonuses," a dealer with a private bank said. Around INR 250 billion of month-end inflows are estimated to have entered the banking system Monday. Adding to that, INR 774.13 billion worth of the 6.18%, 2024 gilt turned up for redemption Tuesday, data from the RBI showed.

 

The interbank borrowing rates were below the RBI's repo rate (6.50%) throughout the day, and were closer to the RBI's standing deposit facility rate. This prompted the central bank to conduct a two-day INR 1.25 trillion variable rate reverse repo auction. Banks parked INR 708.25 billion with the RBI at a cut-off rate of 6.49%. "During the day, the (money market) rates were below 6.25% so the VRRR auction saw good participation from banks as they could park their funds at better rates," a dealer with another private bank said. The auction is due for reversal Thursday.

 

Outflows on account of tax deducted at source and excise duty are likely to begin from Thursday, dealers said. They do not expect any sharp drop in surplus liquidity from the tax outflows. "Banks have ample surplus liquidity and the amount of the tax outflows will be around INR 500 billion," a dealer with a private bank said. On Thursday, the reversal of two variable rate reverse repo auctions conducted by the RBI earlier will return INR 1.45 trillion to the banking system.

 

On Monday, banks maintained INR 10.27 trillion with the RBI, against INR 10.44 trillion Sunday. The average daily cash reserve requirement for the current fortnight is INR 10.12 trillion.

 

The following are the other highlights:

* The weighted average call rate was 6.31%, against 6.41% Monday.

* The weighted average rate for tri-party repo was 6.10%, against 6.08% Monday.

* Reversal of the standing deposit facility added INR 1.94 trillion to the banking system, while reversal of the marginal standing facility drained INR 52.31 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

5.95%--Tuesday's close for one-day loans

6.40%--Tuesday's open for one-day loans

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

 

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

TENURE	TUESDAY	MONDAY
Overnight	6.40	6.50
3-day	--	--
14-day	6.93	6.94
1-month	7.08	7.09
3-month	7.28	7.28

 

---

India Call: Below RBI's repo rate; liquidity surplus highest since Oct 4

 

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 6.50% on Tuesday, owing to low demand for funds from banks as liquidity in the banking system increased further, dealers said. At 0915 IST, the one-day call money rate was at 6.40%, against 5.75% at close on Monday.

 

The surplus liquidity on Monday was at INR 2.76 trillion, against INR 1.65 trillion on Sunday. The surplus liquidity was the highest since Oct. 4, when it was INR 2.81 trillion. Dealers attributed the increase in the surplus amount to the remaining inflows from the government's month-end spending. "Some staggered inflows from the salary and pension payment would have widened the surplus, as other than that there was nothing scheduled," a dealer with a private bank said. 

 

Market participants are of the view that activity in the money market is likely to remain tepid owing to low requirement for funds. "The surplus liquidity is at a comfortable level and there is no scheduled outflow for the day to pull down the surplus," a dealer with a state-owned bank said. Dealers expect that the RBI might conduct a short-tenure variable rate reverse repo auction. 

 

Dealers said that if overnight rates slip below the RBI's standing deposit facility of 6.25%, the central bank might be prompted to announce a short-tenure variable rate reverse repo auction. "Banks might participate actively at the auction, if there is one, as they have more than sufficient funds right now," a dealer with another state-owned bank said. A fall in money market rates on Monday prompted the RBI to conduct a three-day, INR 1.75-trillion variable rate reverse repo auction. Banks bid aggressively at the auction and parked INR 740.00 billion at the cut-off rate of 6.49%.

 

On Monday, banks maintained INR 10.27 trillion with the RBI, against INR 10.44 trillion on Sunday. The average daily cash reserve requirement for the current fortnight is INR 10.12 trillion.

 

Following are the other highlights:

* The weighted average call rate was 6.40%, against 6.41% on Monday.

* The weighted average rate for triparty repo was 6.13%, against 6.08% on Monday.

* Reversal of the standing deposit facility will add INR 1.94 trillion to the banking system, while reversal of the marginal standing facility will drain INR 52.31 billion.

* The call rate is seen in a range of 6.20-6.70% during the day. (Vidhushi RajPurohit)

 

End

 

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

 

Edited by Rajeev Pai

 

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