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Informist, Tuesday, Dec. 10, 2024

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended near the Reserve Bank of India's marginal standing facility rate of 6.75% Tuesday on high demand for funds from banks as the liquidity surplus narrowed, dealers said. The one-day call money rate ended at 6.74%, against 5.75% on Monday.

According to data on the RBI's website, the liquidity surplus narrowed to INR 233.42 billion Monday from INR 432.61 billion on Sunday. The fall in surplus was attributed to outflows of around INR 400 billion which happened on Monday, dealers said. These outflows were to pay for government securities at auction and for tax deducted at source and excise duty, dealers said.

The decline in liquidity surplus resulted in the weighted average call rate and weighted average triparty repo rate trading above the repo rate. At 1000 IST, the weighted average triparty repo rate was at 6.62% against 6.52% on Monday, while the weighted average call rate was at 6.79% against 6.56% in the previous session. This led many banks to expect a variable rate repo operation in the initial half, but that did not happen.

"Yes, the triparty repo rate did cross RBI's comfortable band, but we did not see any move by them," a dealer at a state-owned bank. "They are already trying to inject liquidity by intervening in the forex (foreign exchange) market by doing a buy/sell swap." Over the previous week, dollar-rupee buy/sell swap operations conducted by the central bank have added around INR 400-500 billion to the banking system, foreign exchange dealers said. 

While these inflows did provide some support to liquidity, these were not enough to cool money market rates, dealers said. As a result, some dealers expect the central bank to conduct a three-day variable rate repo operation on Wednesday for around INR 500 billion, dealers said.

Going forward, the banking system liquidity is expected to slip into deficit due to outflows for advance tax which are likely to start from Friday, dealers said. "I think after the outflows for advance tax are completed, we will definitely see a deficit of around INR 1.5 trillion," a dealer at another state-owned bank. "I don't think it will rise beyond that in the second week as we have inflows due to the first tranche of CRR (cash reserve ratio) on Friday." The outflows for advance tax are expected to drain around INR 1.5 trillion from the banking system, dealers said.
 

The following are the other highlights:

* The weighted average call rate was 6.67% against 6.56% on Monday.

* The weighted average rate for triparty repo was 6.64% as compared to 6.52% on Monday.

* Reversal of the standing deposit facility will add INR 733.11 billion to the banking system, while reversal of the marginal standing facility will drain INR 8.26 billion.
 

OUTLOOK

* On Wednesday, the one-day call money rate may open near the RBI's marginal standing facility rate of 6.75% due to demand for funds from banks.

* During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.

CALL RATE

6.74%--Tuesday's close for one-day loans

6.80%--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:

India Call: Above RBI's MSF on high demand for funds amid tight liquidity

MUMBAI – The interbank call money rate was above the Reserve Bank of India's marginal standing facility of 6.75% on Tuesday due to demand for funds in early trade, dealers said. At 0945 IST, the one-day call money rate was 6.80%, against 5.75% at close on Monday. 

According to data on the RBI's website, the liquidity surplus narrowed slightly to INR 233.42 billion on Monday from INR 432.61 billion on Sunday. On Monday, outflows of around INR 400 billion took place, out of which INR 300 billion were for payments for the government security auction held on Friday, dealers said. The remaining outflows were for tax deducted at source and excise duty, dealers said.

During the day, no inflows or outflows are scheduled, dealers said. However, in the coming days, banking system liquidity may slip into deficit due to outflows for advance tax which will start next week, dealers said. 

"In a day or two, the liquidity will slip into deficit as outflows for advance tax will start. Since it is quarter-end, banks will also have a good amount of disbursements," a dealer at a state-owned bank said. "All of these things will weigh on the liquidity and result in money market rates shooting up."

The weighted average triparty repo rate, which closed at 6.52% on Monday, was now trading at 6.62%. The weighted average call rate, which closed at 6.56% on Monday, was at 6.79%. 

Following are the other highlights:

* The weighted average call rate was 6.79%, against 6.56% on Monday.

* The weighted average rate for triparty repo was 6.62%, against 6.52% on Monday.

* Reversal of the standing deposit facility will add INR 733.11 billion to the banking system, while reversal of the marginal standing facility will drain INR 8.26 billion.

* During the day, the call rate is seen in a range of 6.00-6.80%.

End

US$1 = INR 84.85

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

Edited by Rajeev Pai

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