India cash rates up on strong demand, tight supply
MUMBAI: Indian cash rates were higher on Thursday as demand for funds was strong and liquidity in the banking system short.
At 12:40 p.m., the one-day interbank cash rate was at 6.70/80 percent against 6.25/30 percent on Tuesday for two-day loans.
Financial markets were closed on Wednesday for a national holiday.
"The deficit liquidity situation continues to be as it is. Demand was also pretty robust early on (Thursday), so we should see cash rate around the current level for the day," said a dealer with a large state-run bank.
The interbank cash rates had eased sharply on Tuesday as demand had ebbed at the fag end of trade.
Most banks had met reserve needs before the Reserve Bank of India (RBI) announced its quarterly monetary policy review on fear of sharp increase in borrowing costs if the RBI raised key rates aggressively.
But the central bank raised raised its repo rate to 6.5 percent from 6.25 percent and lifted the reverse repo rate to 5.5 percent from 5.25 percent.
On Thursday, banks borrowed 622.05 billion rupees at the RBI's morning repo auction, against a total of 1.14 trillion rupees injected by the central bank through its twin repo auctions on Tuesday.
Volumes in the inter-bank cash market were at 64.40 billion rupees as against a total of 71.93 billion rupees on Tuesday, Clearing Corp of India data showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was at 273.06 billion rupees versus a total of 511.07 billion rupees on Tuesday.
The weighted average rate in the call money market was at 6.71 percent, down 2 basis points from the previous close, while! in the CBLO market it was at 6.47 percent, up 65 basis points.
Any rise in cash rates is also likely to be limited as demand generally is lower towards the end of the reporting fortnight.
Also, the fact the central bank has extended the shelf life of most of its liquidity easing measures up to April 8 will help keep a lid on the cash rates, dealers said.
The RBI conducts two rounds of repo auctions on a daily basis and has cut the statutory liquidity ratio to 24 percent to make fund raising from the central bank easier.
At 12:40 p.m., the one-day interbank cash rate was at 6.70/80 percent against 6.25/30 percent on Tuesday for two-day loans.
Financial markets were closed on Wednesday for a national holiday.
"The deficit liquidity situation continues to be as it is. Demand was also pretty robust early on (Thursday), so we should see cash rate around the current level for the day," said a dealer with a large state-run bank.
The interbank cash rates had eased sharply on Tuesday as demand had ebbed at the fag end of trade.
Most banks had met reserve needs before the Reserve Bank of India (RBI) announced its quarterly monetary policy review on fear of sharp increase in borrowing costs if the RBI raised key rates aggressively.
But the central bank raised raised its repo rate to 6.5 percent from 6.25 percent and lifted the reverse repo rate to 5.5 percent from 5.25 percent.
On Thursday, banks borrowed 622.05 billion rupees at the RBI's morning repo auction, against a total of 1.14 trillion rupees injected by the central bank through its twin repo auctions on Tuesday.
Volumes in the inter-bank cash market were at 64.40 billion rupees as against a total of 71.93 billion rupees on Tuesday, Clearing Corp of India data showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was at 273.06 billion rupees versus a total of 511.07 billion rupees on Tuesday.
The weighted average rate in the call money market was at 6.71 percent, down 2 basis points from the previous close, while! in the CBLO market it was at 6.47 percent, up 65 basis points.
Any rise in cash rates is also likely to be limited as demand generally is lower towards the end of the reporting fortnight.
Also, the fact the central bank has extended the shelf life of most of its liquidity easing measures up to April 8 will help keep a lid on the cash rates, dealers said.
The RBI conducts two rounds of repo auctions on a daily basis and has cut the statutory liquidity ratio to 24 percent to make fund raising from the central bank easier.
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