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Informist, Saturday, Mar. 15, 2025

By Vidhushi RajPurohit

MUMBAI –  Demand for funds from banks remained subdued on Saturday as they met their weekend funding requirements on Thursday. Consequently, the interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 6.00%. Money markets were shut on Friday on account of Holi festival.

On Saturday, the two-day call rate ended at 5.80%, against 5.87% for four-day loans on Thursday. As is usual on Saturday, the market activity remained muted. During the day, only 70 trades worth INR 14.63 billion were settled. 

According to data from the RBI, the net liquidity injected by the central bank--a proxy for systemic liquidity conditions--increased to INR 1.38 trillion on Wednesday from INR 1.05 trillion on Tuesday. In the upcoming days, dealers expect the systemic liquidity to tighten on account of tax payments. Outflows for advance tax commenced on Thursday for which the dealers have pegged the total quantum to be around INR 2.50 trillion. 

However, dealers were of the view that the RBI's continued efforts to provide banks with sufficient funds with its fine-tuning and long-term operations will help to keep the overnight interbank borrowing rates in check. Considering the large quantum of tax-related outflows, on Thursday, RBI had scheduled two variable rate repo auctions for Monday, with a notified amount of INR 1 trillion each. 

While taking care of providing transient liquidity, the RBI had earlier announced measures to infuse durable liquidity into the banking system. Since January, it has conducted open market operation auctions to purchase government bonds amounting to INR 1.5 trillion. In terms of screen-based purchases, it bought gilts worth INR 388.15 billion in January. On Tuesday, it is scheduled to conduct an INR-500-billion OMO auction to buy gilts. The central bank will also conduct a dollar/rupee buy/sell swap for $10 billion for a period of 36 months on Mar. 24. 

Following are the other highlights:

* The weighted average call rate was 6.05% against 6.36% on Thursday.

* The weighted average rate for triparty repo was 6.26% compared to 6.21% on Thursday.

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.

* RBI to hold overnight variable rate repo auction for INR 1 trillion at 1000-1030 IST

* RBI to hold four-day variable rate repo auction for INR 1 trillion at 1100-1130 IST

* During the day, the call rate is seen in a range of 5.85-6.40%, dealers said.

CALL RATE

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

6.40%--Saturday's open for two-day loans

5.87%--Thursday's close for four-day loans

End

Edited by Deepshikha Bhardwaj

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