More Stories

Informist, Wednesday, Dec. 4, 2024

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate of 6.50% on Wednesday as demand for funds from banks eased due to liquidity surplus, dealers said. The one-day call money rate ended at 6.40%, against 6.45% on Tuesday.

According to latest data from the RBI, liquidity was in a surplus of INR 1 trillion on Tuesday, against INR 894.51 billion on Monday. The liquidity surplus widened on inflow of around INR 1.25 trillion on account of government's month-end spending and payment of salaries, dealers said. The last tranche of inflows for the same was on Tuesday, dealers said.

After these inflows, the money market rates cooled off, which allowed banks to maintain a cushion ahead of the outflows scheduled for next week, dealers said. According to data on RBI's website, funds parked by banks under the standing deposit facility increased to INR 1.09 trillion on Tuesday from INR 894.61 billion on Monday.

"Outflows for TDS (tax deducted at source) are expected to start from next week, banks are increasing funds parked in SDF with this view," a dealer at a private bank said. "Once the outflow starts it will be costlier for them to borrow at that time, so they are doing it when the rates are comparatively low." Starting next week, outflows for excise duty and tax deducted at source are expected to drain around INR 500 billion from the banking system in a phased manner, dealers said.

During the day, outflows of INR 258.37 billion for the payment of state government bond auction held on Tuesday took place, dealers said. Apart from that, no other inflows or outflows were scheduled for the day, dealers said.

The market is certain about the course of action the RBI might take in its monetary policy meeting outcome on Friday. "There is a consensus in the market that Friday's outcome of the MPC (Monetary Policy Committee) meeting will work in favour of easing the rates," a dealer at a state-owned bank said. While dealers are unsure about a policy rate cut, they expect a cut in the cash reserve ratio, which currently stands at 4.5%. "If there is a CRR cut, then it will give a boost to liquidity and bring down the interbank borrowing rates as well."

Following are the other highlights:

* The weighted average call rate was 6.42%, against 6.44% on Tuesday.

* The weighted average rate for triparty repo was 6.30%, against 6.26% on Tuesday.

* Reversal of the standing deposit facility added INR 1.09 trillion to the banking system, while reversal of the marginal standing facility drained INR 12.46 billion.

OUTLOOK

* On Thursday, 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 requirements.

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

CALL RATE

6.40%--Wednesday's close for one-day loans

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

6.45%--Tuesday's close for one-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 for funds; surplus liquidity rises

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% on Wednesday due to demand for funds in early trade despite liquidity being in a surplus, dealers said. At 1010 IST, the one-day call money rate was 6.50%, against 6.45% at the close on Tuesday. 

The liquidity surplus in the banking system increased on account of inflows from the government's month-end spending, dealers said. According to the latest data from the RBI, liquidity was in a surplus of INR 1 trillion on Tuesday, against INR 894.51 billion on Monday. 

Banking system liquidity was infused with inflows of around INR 1.25 trillion for the government's month-end spending over the period of a week, dealers said. "During the first week of a month, liquidity generally improves because of government's month-end spending and salaries," a dealer at a state-owned bank said. "As per my estimate, I think we might have received around INR 1.20 trillion for the same."

During the day, outflows of INR 258.37 billion for the payment of the state government security auction held on Tuesday will weigh on the banking system's liquidity, dealers said. Apart from this, no other inflows or outflows are scheduled for the day, dealers said. 

Following are the other highlights:

* The weighted average call rate was 6.49%, against 6.44% on Tuesday.

* The weighted average rate for triparty repo was 6.25%, against 6.26% on Tuesday.

* Reversal of the standing deposit facility will add INR 1.09 trillion to the banking system, while reversal of the marginal standing facility will drain INR 12.46 billion.

* During the day, the call rate is seen in a range of 6.00-6.60%. (Siddhi Chauhan)

End

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

Edited by Ashish Shirke

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.