Call rates ends down as demand wanes
MUMBAI: Indian cash rates eased in late trade on dwindling demand towards the end of the session, despite trading above the central bank's main lending rate of 6.25 per cent for most of the day.
Liquidity in the system has improved marginally due to a pick-up in government spending, traders said.
The one-day interbank cash rate ended at 6.25/30 per cent, down from Monday's close of 6.70/75 per cent.
The rate stayed above the repo rate of 6.25 per cent most part of the day on expectations of a rate hike at the Jan. 25 policy.
"Need for funds is still quite strong and should be so till Friday. But given the overall better liquidity condition the rate may at the most touch 6.90 per cent," said a dealer with a large state-run bank.
Demand is typically strong at the begining of a reporting fortnight as most banks prefer to maintain more than mandated reserve requirements so as to reduce exposure to fluctuation in call rates in the second week.
Volumes in the inter-bank cash market was at were at 100.67 billion rupees on Tuesday against a total of 130 billion rupees on Monday, Clearing Corp of India data showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was at 537.13 billion rupees against a total of 605.56 billion rupees on Monday.
Liquidity has improved this month following an increase in government spending and by liquidity injection from the Reserve Bank of India (RBI) through bond purchases in the secondary market under open market operations.
Under the scheduled OMO bond purchase programme which ended last Wednesday, the RBI bought 370.68 billion rupees of papers! as agai nst 480 billion rupees scheduled.
The central bank's also conducts two rounds of repo auction on daily basis and has cut statutory liquidity ratio to 24 per cent, a move which had helped to limit the rise in cash rate, dealers said.
Banks borrowed 735.80 billion rupees at the RBI's morning repo auction on Tuesday. On Monday, the RBI had injected 1.06 trillion rupees through the twin repo auctions.
The weighted average rate in the call money market was at 6.72 per cent, up marginally 6.69 per cent on Monday.
In the CBLO market, weighted average rate was at 6.25 per cent down 1 basis point from previous close.
Liquidity in the system has improved marginally due to a pick-up in government spending, traders said.
The one-day interbank cash rate ended at 6.25/30 per cent, down from Monday's close of 6.70/75 per cent.
The rate stayed above the repo rate of 6.25 per cent most part of the day on expectations of a rate hike at the Jan. 25 policy.
"Need for funds is still quite strong and should be so till Friday. But given the overall better liquidity condition the rate may at the most touch 6.90 per cent," said a dealer with a large state-run bank.
Demand is typically strong at the begining of a reporting fortnight as most banks prefer to maintain more than mandated reserve requirements so as to reduce exposure to fluctuation in call rates in the second week.
Volumes in the inter-bank cash market was at were at 100.67 billion rupees on Tuesday against a total of 130 billion rupees on Monday, Clearing Corp of India data showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was at 537.13 billion rupees against a total of 605.56 billion rupees on Monday.
Liquidity has improved this month following an increase in government spending and by liquidity injection from the Reserve Bank of India (RBI) through bond purchases in the secondary market under open market operations.
Under the scheduled OMO bond purchase programme which ended last Wednesday, the RBI bought 370.68 billion rupees of papers! as agai nst 480 billion rupees scheduled.
The central bank's also conducts two rounds of repo auction on daily basis and has cut statutory liquidity ratio to 24 per cent, a move which had helped to limit the rise in cash rate, dealers said.
Banks borrowed 735.80 billion rupees at the RBI's morning repo auction on Tuesday. On Monday, the RBI had injected 1.06 trillion rupees through the twin repo auctions.
The weighted average rate in the call money market was at 6.72 per cent, up marginally 6.69 per cent on Monday.
In the CBLO market, weighted average rate was at 6.25 per cent down 1 basis point from previous close.
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