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Informist, Saturday, Apr. 19, 2025

By Cassandra Carvalho

MUMBAI – The interbank call money rate Saturday closed below the Reserve Bank of India's Standing Deposit Facility rate of 5.75% due to low demand for funds from banks, dealers said. Volumes were low, as is usually seen on Saturdays. Trade volumes in the call money market dropped to INR 15.56 billion, from INR 145.48 billion Thursday. Financial markets were shut on Friday for Good Friday.

The two-day call money rate ended at 5.40%, down from 5.75% for four-day loans Thursday. The weighted average call rate was 5.50% Saturday, sharply down from 5.88% on Thursday, while the weighted average rate in the larger tri-party repo market, which includes mutual funds, was down by 9 basis points at 5.63%, from 5.72% Thursday.

On Wednesday, the net liquidity absorbed by the Reserve Bank of India, a proxy for systemic liquidity surplus, was INR 1.70 trillion. Banks parked INR 1.88 trillion at the Standing Deposit Facility that day. The systemic liquidity has improved due to higher-than-expected government month-end spending that began March-end and infusion of funds through various liquidity-easing measures by the RBI. So far in April, the RBI has infused funds amounting to INR 800 billion through three open market operation auctions and is scheduled to purchase gilts amounting to INR 400 billion from two more OMO auctions this month.

However, in the coming days, some strain on banking system liquidity is expected on account of outflows for Goods and Services Tax payment, dealers said. Outflows for the same, which are expected to start from Monday, may drain INR 800 billion to INR 1 trillion, dealers said. On Monday, inflows worth INR 400 billion from the central bank's open market purchase of gilts Thursday will be largely offset by outflows of INR 300 billion as payment on account of gilt auction Thursday.

OUTLOOK

* On Monday, the one-day call rate may open higher than the RBI's repo rate due to increased demand from banks on account of Goods and Services Tax outflows. 

* During the day, the call rate is seen at 5.80-6.20% and the triparty repo rate at 5.75-6.00%.

* RBI will hold an overnight variable rate repo auction for INR 1 trillion 1000-1030 IST Monday.

CALL RATE

5.40%--Saturday's close for two-day loans

5.95%--Saturday's open for two-day loans

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

End

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

Edited by Ashish Shirke

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