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Informist, Thursday, Dec. 19, 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% Thursday as demand for funds from banks eased towards the end of the day, dealers said. The one-day call money rate ended at 5.75%, against 5.85% Wednesday.

According to data on the RBI's website, the liquidity deficit was little changed Wednesday at INR 1.51 trillion, against INR 1.45 trillion Tuesday. The liquidity deficit was little changed despite outflows of INR 208.25 billion Wednesday on account of payments for the state government securities auction, dealers said.

"We are yet to figure out why the payment of state government security outflows is not being reflected in liquidity. Probably it is because banks would have utilised the funds parked under SDF (standing deposit facility)," a dealer at a state-owned bank said.

According to data from the RBI website, banks Wednesday drew around INR 289.47 billion from funds parked with the central bank through the standing deposit facility. At the end of the day, funds parked under the standing deposit facility stood at INR 611.25 billion.

On Thursday, the weighted average call rate and weighted average triparty repo rate were seen rising from the previous day's level, possibly due to outflows for goods and services tax. "The (money market) rates are shooting up. It seems GST outflows have already started, otherwise the rates would have cooled off towards the end of the day," a dealer at a private bank said. "The major chunk of outflows will take place tomorrow (Friday) and Saturday."

At 1700 IST, the weighted average call rate was at 6.71% against 6.69% Wednesday, while the weighted average triparty repo rate was at 6.55%, against 6.50% the previous day. The spike in rates led some market participants to expect a variable rate repo operation by the central bank during the day. However, no such operation was conducted by the RBI as Thursday was expected to see smaller GST outflows, dealers said.

"Yes, during the day some people were expecting a VRR, but since the majority of the outflows will place on Friday, there was no need for it," another dealer at a private bank said. "But the RBI will definitely conduct a four-day rate repo around INR 750 billion-INR 1 trillion tomorrow (Friday)."

Market participants expect outflows for GST payments to drain around INR 1 trillion-INR 1.5 trillion from the banking system, dealers said. 

The following are the other highlights:

* The weighted average call rate was 6.71%, against 6.69% Wednesday.

* The weighted average rate for triparty repo was 6.55%, against 6.50% Wednesday.

* Reversal of the standing deposit facility will add INR 611.25 billion to the banking system, and reversal of the marginal standing facility will drain INR 17.34 billion.

OUTLOOK

* On Friday, the three-day call money rate may open near the 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 6.00-6.85%, dealers said.

CALL RATE

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

6.85%--Thursday's open for one-day loans

5.85%--Wednesday'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 MSF rate as liquidity continues to be in deficit

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility rate of 6.75% on Thursday due to demand for funds from banks as liquidity in the banking system remains in deficit, dealers said. At 1010 IST, the one-day call money rate was 6.75%, against 5.85% on Wednesday.

According to data on the RBI's website, the liquidity deficit was little changed on Wednesday at INR 1.51 trillion, against INR 1.45 trillion on Tuesday. "Even though the deficit has not increased drastically, the problem is that it stays at the same level, which will only increase in the coming days," a dealer at a state-owned bank said. "Goods and services outflows will probably start from either today (Thursday) or from tomorrow (Friday)." 

On Wednesday, outflows of around INR 208.25 billion, on account of payments for the state government security auction, also drained banking system liquidity, dealers said. The banking system liquidity was supported by the reversal of the dollar/rupee overnight swap, or cash-tom, operations conducted by the RBI the previous day. However, the impact of the same was offset by the central bank intervening in the foreign exchange market by way of dollar sales, draining rupee liquidity out of the banking system, dealers said. 

Going forward, liquidity outflows for good and service tax will likely start from Thursday, dealers said. Outflows for the same are expected to drain around INR 1.5 trillion from the banking system, dealers said. 

Following are the other highlights:

* The weighted average call rate was 6.82%, against 6.69% on Wednesday.

* The weighted average rate for triparty repo was 6.50%, unchanged from Wednesday.

* Reversal of the standing deposit facility will add INR 611.25 billion to the banking system, and reversal of the marginal standing facility will drain INR 17.34 billion.

* During the day, the call rate is seen in a range of 6.00-6.90%.  (Siddhi Chauhan)

End

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

Edited by Rajeev Pai

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