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Informist, Thursday, Dec. 12, 2024

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 6.25% on Thursday as demand for funds from banks eases towards the end of the day, dealers said. The one-day call money rate ended at 5.75%, against 6.75% on Wednesday. 
 

According to data on the RBI's website, the liquidity surplus widened slightly to INR 471.29 billion on Wednesday from 356.67 billion on Tuesday. While there were outflows of INR 114 billion on Wednesday for payment for a state bond auction, the market was still unsure about the inflows that aided the banking system's liquidity, dealers said. 

"It is difficult to tell what these inflows are for. It could probably be a result of FX (foreign exchange intervention), or probably it could just be because many banks had panic borrowed yesterday (Wednesday)," a dealer at a private bank said. "Now probably the funds which were borrowed yesterday are being reflected in the banking system." 

These inflows were also reflected in the increase in funds parked under the standing deposit facility window, dealers said. According to data from RBI, funds parked with the central bank through the standing deposit facility increased to INR 859.61 billion on Wednesday from INR 530.24 on Tuesday.

The slight ease in liquidity also resulted in the weighted average triparty repo rate trading even below the repo rate of 6.50%, dealers said. At the time of close, the weighted average triparty repo rate was at 6.47% against 6.65% in the previous trading session. 

However, the ease in rates is temporary as the outflows for advance tax paymentss are expected to start from Friday, dealers said. "The cool-off in rates (money market rates) is just temporary, and it is more so because we don't have an outflow scheduled for today (Thursday)," a dealer at a state-owned bank said. "We see a rise in rates from tomorrow (Friday) when the outflows will start for advance tax." 

Outflows for advance tax payments are expected to start from Friday as markets are shut on Nov. 15, dealers said. Around INR 1.25 trillion- INR 1.50 trillion are expected to be drained from the banking system due to outflows for advance tax, dealers said. 

The following are the other highlights:

* The weighted average call rate was 6.62%, against 6.70% on Wednesday.

* The weighted average rate for triparty repo was 6.47%, against 6.65% on Wednesday.

* Reversal of the standing deposit facility will add INR 859.61 billion to the banking system, while reversal of the marginal standing facility will drain INR 53.14 billion.

OUTLOOK

* On Friday, the three-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

5.75%--Thursday's close for one-day loans

6.80%--Thursday's open for one-day loans

6.75%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At MSF rate due to high demand for funds amid tight liquidity

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility of 6.75% on Thursday amid tight liquidity conditions, dealers said. At 0950 IST, the one-day call money rate was 6.75%, unchanged from close on Wednesday. 

According to data on the RBI's website, the liquidity surplus widened slightly to INR 471.29 billion on Wednesday from 356.67 billion on Tuesday. While there were outflows of INR 114 billion on Wednesday for payment for a state government security auction, the market was still unsure about the inflows that aided the banking system's liquidity, dealers said. 

Some dealers speculated banks had panic-borrowed ahead of the advance tax outflows, which are likely to begin on Friday. According to data from RBI, funds parked with the central bank through the standing deposit facility increased to INR 859.61 billion on Wednesday from INR 530.24 on Tuesday. Outflows for advance tax are expected to drain out around INR 1.25 trillion to INR 1.5 trillion from the banking system, dealers said. 

"Even the inflows that will enter the banking system after the cash reserve ratio cut may not help in offsetting the outflows which are scheduled for December," a dealer at a state-owned bank said. Announcing the outcome of the December Monetary Policy Committee meeting on Friday, then RBI Governor Shaktikanta Das said the cash reserve ratio would be cut by 25 basis points effective from the fortnight starting Dec. 14, and by another 25 bps from the fortnight starting Dec. 28. The move was estimated to increase liquidity in the banking system by INR 1.16 trillion, Das said.

Following are the other highlights:

* The weighted average call rate was 6.75%, against 6.70% on Wednesday.

* The weighted average rate for triparty repo was 6.58%, against 6.65% on Wednesday.

* Reversal of the standing deposit facility will add INR 859.61 billion to the banking system, while reversal of the marginal standing facility will drain INR 53.14 billion.

* During the day, the call rate is seen in a range of 6.20-6.90%. (Siddhi Chauhan)

End

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

Edited by Tanima Banerjee

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