More Stories

Informist, Tuesday, Dec. 3, 2024

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate of 6.50% on Tuesday due to low demand for funds from banks as liquidity returned to surplus, dealers said. The one-day call money rate ended at 6.45%, against 6.00% on Monday.

According to the latest data from the RBI's website, liquidity in the banking system was in a surplus of INR 894.51 billion on Monday, against INR 511.23 billion on Sunday. The liquidity surplus increased due to inflows from the government's month-end spending which added around INR 1.25 trillion to the banking system, dealers said.

"The liquidity is expected to remain in a surplus until 15th of the month, after that we can see a negative figure (deficit)," a dealer at a state-owned bank said. "Yes, there are excise duty outflows but still, that won't be able to exert a higher pressure on liquidity."

On Wednesday, outflows of INR 258.37 billion for the payment of state government security auction held on Tuesday will also weigh on the banking system's liquidity, dealers said. Going forward, outflows of excise duty and tax deducted at source due next week are expected to drain around INR 500 billion from the banking system, dealers said.

The market remains decisive on the course of action the RBI might take in its monetary policy meeting outcome due on Friday. While some market participants have ruled out the chances of open market operations purchases, citing it as a tool of last resort, others are contemplating over the chances of a reduction in the cash reserve requirement, dealers said.

These expectations have led the money market rates, which were above the marginal standing deposit facility rate in the previous week, to ease on Tuesday, dealers said. The weighted average call money rate ended near the RBI's repo rate at 6.44%, against 6.52% on Monday. The weighted average tri-party repo rate was 6.26%, against 6.36% at the previous close.

Following are the other highlights:

* The weighted average call rate was 6.44%, against 6.52% on Monday.

* The weighted average rate for triparty repo was 6.26%, against 6.36% on Monday.

* Reversal of the standing deposit facility added INR 408.79 billion to the banking system, while reversal of the marginal standing facility drained INR 21.45 billion.

OUTLOOK

* On Wednesday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks in early trade to meet reserve requirments.

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

CALL RATE

6.45%--Tuesday's close for one-day loans

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

6.00%--Monday's close for two-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate due to demand for funds in early trade

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% on Tuesday due to demand for funds in early trade, dealers said. At 0950 IST, the one-day call money rate was 6.50%, against 6.00% at close on Monday. 

The liquidity surplus in the banking system widened due to inflows from the government's month-end spending, which added about INR 1 trillion over four working days, dealers said. According to latest data from RBI, the liquidity was in a surplus of INR 894.51 billion on Monday, against INR 511.23 billion on Sunday. 

Inflows for the government's month-end spending offered respite to money market rates, which were earlier near the marginal standing deposit facility rate of 6.75%, dealers said. On Monday, the weighted average call money rate settled near the RBI's repo rate at 6.52%, against 6.22% on Saturday, while the weighted average tri-party repo rate was at 6.36%, against 6.48% at the previous close.

"The inflows for month-end spending have helped the money market rates to cool off slightly," a dealer at a private bank said. "I think rates will remain near repo rate for this week. By next week, we could see a spike in rates because of outflows."

Ahead of the outflows due next week for tax deducted at source and excise duty payments, banks increased the funds parked with the central bank on Monday, dealers said. According to data from RBI, funds parked through SDF increased to INR 996.33 billion from INR 408.79 billion on Sunday. 

Banking system liquidity is expected to fall back into deficit in the coming days due to outflows for tax deducted at source and excise duty payments, which are expected to drain out around INR 500 billion, dealers said. 

Following are the other highlights:

* The weighted average call rate was 6.50%, against 6.52% on Monday.

* The weighted average rate for triparty repo was 6.28%, against 6.36% on Monday.

* Reversal of the standing deposit facility will add INR 996.33 billion to the banking system, while reversal of the marginal standing facility will drain INR 14.50 billion.

* During the day, the call rate is seen in a range of 6.00-6.75%. (Siddhi Chauhan)

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.