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Informist, Thursday, Dec. 5, 2024

By Kabir Sharma

MUMBAI – The interbank call money rate ended near the Reserve Bank of India's marginal standing facility rate of 6.75% on Thursday due to firm demand for funds from banks as the liquidity surplus narrowed, dealers said. The one-day call money rate ended at 6.70% on Thursday, against 6.40% at close on Wednesday. Market participants keenly await the outcome of the RBI's Monetary Policy Committee meeting on Friday. 

According to the latest data from the RBI, the liquidity surplus narrowed to INR 659.05 billion on Wednesday against INR 1 trillion on Tuesday. Scheduled outflows of INR 258.37 billion for the payment of state government security auction weighed on the banking system's liquidity, dealers said. 

Some dealers speculated that there were some outflows on account of the Reserve Bank of India taking delivery of its dollar/rupee buy-sell swaps conducted in the forwards market earlier. This is estimated to have drained liquidity to the tune of INR 100 billion from the system, dealers said. 

The market is now awaiting the outcome of the RBI's MPC meeting on Friday, where some dealers are expecting a cash reserve ratio cut of 50 bps while some are expecting the RBI to go for a 25 bps repo rate cut to ease money market rates. "They might go for a CRR cut, but a section of the market is also looking at a rate cut," a dealer at a state-owned bank said. 

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.

OUTLOOK

* On Friday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks amid caution ahead of the outcome of the RBI's monetary policy committee meeting.

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

CALL RATE

6.70%--Thursday's close for one-day loans

6.60%--Thursday's open for one-day loans

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

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above repo rate on demand for funds as liquidity surplus narrows

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% on Thursday due to demand for funds in early trade as liquidity surplus narrows, dealers said. At 1000 IST, the one-day call money rate was 6.60%, against 6.40% at close on Wednesday. 

According to the latest data from the RBI, liquidity surplus narrowed to INR 659.05 billion on Wednesday against INR 1 trillion on Tuesday. Wednesday, outflows of INR 258.37 billion for the payment of state government security auction weighed on the banking system's liquidity, dealers said. However, some outflows which were unaccounted for also took place on Wednesday, dealers said. 

"State government security auction outflows were scheduled for yesterday (Wednesday) but that alone cannot exert that much pressure on liquidity, the surplus has been reduced more than it was supposed to," a dealer at a state-owned bank said. "We are also pondering on what other outflows could have taken place, excise duty outflows are scheduled outflows which will start from today (Thursday) so the fall in surplus is definitely not because of that." 

Going forward, liquidity is expected to remain tight as outflows of tax deducted at source and excise duty are expected to start from Thursday, dealers said. The outflows for the same are expected to drain around INR 500 billion from the banking system's liquidity, dealers said. Apart from this, no other inflows or outflows are scheduled for the day, dealers said. 

The upcoming outflows are expected to keep the money market rates above the repo rate of 6.50%, dealers said. The weighted average call rate was 6.59%, against 6.42% on Wednesday, while the weighted average rate for triparty repo was at 6.45% against 6.30% on previous trading session. 

Following are the other highlights:

* The weighted average call rate was 6.59%, against 6.42% on Wednesday.

* The weighted average rate for triparty repo was 6.45%, against 6.30% on Wednesday.

* Reversal of the standing deposit facility will add INR 754.55 billion to the banking system, while reversal of the marginal standing facility will drain INR 32.87 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 Deepshikha Bhardwaj

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