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Informist, Saturday, Feb. 15, 2025

By Sachi Pandey

MUMBAI - The interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 6.00% on Saturday due to low demand for funds from banks. According to dealers, most banks had already met their funding needs for the weekend on Friday, resulting in low market activity.

On Saturday, the two-day call rate ended at 5.80%, unchanged from three-day loans on Friday. Low demand for funds resulted in subdued trading volume, with only 67 trades worth INR 8.03 billion recorded as compared to INR 123.42 billion on Friday.

Owing to the fall in volume, the weighted average rate also fell below the repo rate in the money market. Two-day weighted average call rate was 5.89%, down from 6.38% on Friday.

The two-day weighted average rate in the larger triparty repo market, which includes mutual funds, was 5.67%, lower than 6.32% the previous day. The volume in tri-party repo also remained largely subdued with only 109 trades worth INR 129.85 billion being recorded on Saturday, compared to INR 3.90 trillion on Friday.

The net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--rose to INR 2.42 trillion on Thursday from INR 2.07 trillion on Wednesday. The Indian central bank has likely sold nearly $20 billion in the spot market this week--draining close to INR 1.75 trillion of rupee liquidity--to prop up the rupee, according to market participants. With the impact of dollar sales on rupee liquidity felt with a lag as the operations are settled on a 'T+2' basis, the amount of funds injected by the RBI widened to INR 2.42 trillion on Thursday from INR 697.55 billion on Feb. 6. Dealers, however, said the hit to liquidity has been lower than expected, with the impact of the dollar sales likely mitigated by dollar/rupee buy/sell swaps.

OUTLOOK

* On Monday, the one-day call money rate may open above the RBI's repo rate of 6.25% due to demand for funds from banks early in the day to meet their reserve requirements.

* During the day, the call rate is seen in a range of 5.75-6.40%, dealers said.

* RBI will conduct a four-day variable rate repo auction for INR 750 billion between 1100 IST and 1130 IST Monday

* RBI will conduct an overnight variable rate repo auction for INR 1.00 trillion between 1000 IST and 1030 IST on Monday

CALL RATE

5.80%--Saturday's close for two-day loans

6.50%--Saturday's open for two-day loans

5.80%--Friday's close for three-day loans

End

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

Edited by Avishek Dutta

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