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Informist, Thursday, Jan. 2, 2025

By Kabir Sharma

MUMBAI – The interbank call money rate ended slightly below the Reserve Bank of India's repo rate of 6.50% on Thursday as demand for funds eased towards the end of trade, dealers said. "It was a quiet day. Pension and salary inflows have kept liquidity comfortable and you will see rates being on the cooler end at least until Monday," a dealer at a state-owned bank said.

The one-day call rate ended at 6.45% Thursday, down from 6.55% Wednesday. The weighted average call rate also eased below the repo rate to 6.47% from 6.52%.

According to latest data, the RBI infused liquidity to the tune of INR 1.05 trillion on Wednesday on a net basis, lower than INR 1.32 trillion Tuesday and almost half the INR 2.06 trillion injected on Monday. According to dealers, the liquidity deficit has narrowed thanks to the government's month-end spending of around INR 1.50 trillion flowing into the banking system. This has helped the weighted average call rate climb down from 6.88% on Tuesday, with liquidity conditions easing somewhat also reflecting in the weighted average tri-party repo rate, which was at 6.22% Thursday compared to 6.31% Wednesday and 6.70% Monday.

Dealers said rates in the tri-party repo market are seen trending lower at least until excise and goods and services tax payments begin. These payments could lead to an outflow of around INR 500 billion, they said.

The following are the other highlights:

* Maturity of Treasury bills and coupon payments on government securities led to inflow of INR 204.68 billion Thursday.

* Payment of INR 281.62 billion was made for T-bills auctioned Wednesday.

* Reversal of funds parked at the Standing Deposit Facility added INR 1.16 trillion to the banking system.

OUTLOOK

* On Friday, the three-day call rate may open near the repo rate of 6.50% on demand for funds.
* During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.

CALL RATE

6.45%--Thursday's close for one-day loans

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

6.55%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below RBI's SDF rate as demand for funds by banks eases

MUMBAI – The interbank call money rate was below the Reserve Bank of India's standing deposit facility rate of 6.25% on Thursday as demand for funds from banks eased during the day, dealers said. Rates have moderated from earlier this week due to the improvement in banking system liquidity, they said. At 1254 IST, the one-day call rate was at 6.20%, against Wednesday's close of 6.55%. 

"Liquidity is slightly better today (Thursday) as most of the government month-end spending has happened," a dealer at a private bank said. "Around INR 700 billion was remaining, which came in yesterday (Wednesday) and you can see that in SDF (standing deposit facility) also." Funds parked in the facility were more than INR 1 trillion on both Tuesday and Wednesday, RBI data showed. 

According to data on the central bank's website, the RBI infused liquidity to the tune of INR 1.05 trillion Wednesday, lower than the INR 1.32 trillion it infused on Tuesday. The liquidity deficit narrowed due to completion of inflows for the government's month-end spending, dealers said. Inflows from the government's month-end spending added around INR 1.5 trillion to the banking system, dealers said. 

During the day, inflows of INR 204.68 billion were scheduled on account of the maturity of Treasury bills and coupons on state bonds. However, outflows of INR 281.62 billion for payment of the T-bill auction conducted on Wednesday will negate these scheduled inflows, dealers said.

Dealers said rates in the tri-party repo market are seen trending lower at least until outflows for excise duty payments and goods and services tax payments kick in. "Until next week, you can see TREPS (Triparty Repo Dealing System rate) below 6.30%. It could even fall to 6.20% because banks are comfortable in terms of liquidity now," a dealer at a state-owned bank said.

The RBI has infused over INR 2 trillion of liquidity into the banking system through variable rate repo auctions. On Friday, the four-day VRR worth INR 832.38 billion will reverse.

Following are the other highlights:

* The weighted average call rate was 6.52%, unchanged from Wednesday.

* The weighted average rate for triparty repo was 6.24%, against 6.31% on Wednesday.

* Reversal of the standing deposit facility will add INR 1.16 trillion to the banking system, and reversal of the marginal standing facility will remove INR 6.66 billion.

* During the day, the call rate is seen in a range of 6.00-6.75%. (Kabir Sharma)

End

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

Edited by Ashish Shirke

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