More Stories

Informist, Thursday, Nov. 14, 2024

By Aaryan Khanna

NEW DELHI – The four-day interbank call money rate ended at the Reserve Bank of India's standing deposit facility rate Thursday as demand for funds was low, given high surplus liquidity. Demand for funds was limited despite the long weekend as banks had enough surpluses to meet regulatory requirements, dealers said.

The four-day call money rate ended at 6.25%, against 6.60% for one-day loans Wednesday. Money markets are shut Friday for Guru Nanak Jayanti.

The liquidity surplus in the banking system on Wednesday was at INR 2.12 trillion, slightly higher than INR 2.05 trillion Tuesday, data from the RBI showed. To mop up excess liquidity, the RBI conducted an INR 1.75-trillion, 15-day variable rate reverse repo auction at 1030-1100 IST. However, banks tendered only INR 84.05 billion to the central bank. Despite the heavy liquidity surplus, traders cited scheduled outflows for goods and services tax payments next week as a reason for banks not parking their money with the RBI for the fortnight.

"The market is always more comfortable putting in money in shorter tenure VRRRs," a dealer at a private bank said. "Since the auction didn't really succeed, I think there were plenty of people who expected the (RBI) would conduct a four-day reverse repo for the long weekend."

The RBI did not announce any such auction for Thursday, but after market hours it said it would conduct a four-day, INR 1-trillion variable rate reverse repo auction Monday. Surplus liquidity is even more flush than the data suggests, after the maturity of four variable rate reverse repo auctions of various tenures conducted by the RBI, which restored INR 1.66 trillion to the banking system Thursday, dealers said. 

Banks maintained INR 9.93 trillion with the RBI as cash balances Wednesday, against Tuesday's amount of INR 10.07 trillion. The average daily cash reserve requirement for the fortnight ending Friday is INR 10.12 trillion.

Following are the other highlights:

* The weighted average call rate was 6.46%, against 6.39% on Wednesday.

* The weighted average rate for tri-party repo was 6.32%, against 6.37% on Wednesday.

* Reversal of the standing deposit facility will add INR 655.40 billion to the banking system, while reversal of the marginal standing facility will drain INR 80.77 billion.

OUTLOOK

* Money markets are shut Friday for Guru Nanak Jayanti. On Saturday, the two-day call money rate may open below the RBI's repo rate of 6.50% due to low demand for funds as banks have already met regulatory requirements.

* As is usually the case on Saturdays, volumes are expected to be low.

* During the day, the call rate is seen in a range of 6.00-6.60%, dealers said.

CALL RATE

6.25%--Thursday's close for four-day loans

6.40%--Thursday's open for four-day loans

6.60%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate on surplus liquidity; RBI to hold 15-day VRRR

MUMBAI – The four-day interbank call money rate was below the Reserve Bank of India's repo rate of 6.50% on Thursday due to low demand for funds from banks amid ample systemic surplus, dealers said. At 0958 IST, the four-day call money rate was at 6.40%, against 6.60% one-day Wednesday. Money markets will be shut on Friday on account of Guru Nanak Jayanti.  

The liquidity surplus in the banking system on Wednesday was at INR 2.12 trillion, slightly higher than INR 2.05 trillion on Tuesday, data from the RBI showed. Continuing with its liquidity managing operations, the RBI on Wednesday announced a 15-day INR 1.75-trillion variable rate reverse repo auction at 1030-1100 IST on Thursday. The announcement was in line with the expectations of market participants. "The auction will not see much demand as GST outflows are expected in the next week and this will lock our money for 15 days," a dealer with a state-owned bank said. 

However, some market participants said that liquidity is expected to remain comfortable on account of redemption of gilts worth INR 650.80 billion. Maturity of four variable rate reverse repo auctions of various tenures conducted by the RBI will also restore INR 1.66 trillion to the banking system. "Money will be parked today at the VRRR because there is ample liquidity and more will be added via gilt redemption, another INR 600 billion is lying in SDF so it shouldn't be a problem," a dealer at a large state-owned bank said. 

On Wednesday, the triparty repo rate rose to a high of 6.89% which led to a demand-supply mismatch in the system, dealers said. "Yesterday, rates (triparty repo rates) shot up because of mismatch, after VRRR banks started to engage in spread trading in anticipation of rates falling which generally happens after VRRR," a dealer at a state-owned bank. "However, when that did not happen, they had to borrow more through MSF (marginal standing facility)."

The government's month-end spending brought in an inflow of around INR 1 trillion into the banking system and, since there have not been significant outflows, the surplus has been at and above INR 2.00 trillion for almost all the days in November. 

Banks maintained INR 9.93 trillion with the RBI as cash reserves on Wednesday, against Tuesday's amount of INR 10.07 trillion. The average daily cash reserve requirement for the current fortnight ending on Friday is INR 10.12 trillion. 

Following are the other highlights:

* The weighted average call rate was 6.50%, against 6.39% on Wednesday.

* The weighted average rate for triparty repo was 6.30%, against 6.37% on Wednesday.

* Reversal of the standing deposit facility will add INR 655.40 billion to the banking system, while reversal of the marginal standing facility will drain INR 80.77 billion.

* During the day, the call rate is seen in a range of 5.90-6.60%.  (Kabir Sharma)

End

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

Edited by Rajeev Pai

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

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