Indian cash rates steady as supply matches demand

MUMBAI: India . cash rates were steady on Thursday as liquidity in the banking system was adequate to meet demand for funds.

At 12:02 p.m., the one-day interbank cash rate was at 6.30/6.35 percent, steady at the previous close.

"Cash supply has been much better and demand too is not posing any problems. So, call money rates are likely to stay below 6.50 percent," said a dealer with a large state-run bank.

The weighted average rate in the call money market was at 6.31 percent, up 2 basis points from Wednesday's close.

In the collateralised borrowing and lending obligation (CBLO) market, it was unchanged at 6.22 percent.

Volumes in the inter-bank cash market were at 81.97 billion rupees as against a total of 128.27 billion rupees on Wednesday, as per data from Clearing Corp of India.

In the CBLO market, they were 354.45 billion ruepes as against a total of 619.52 billion rupees.

Cash supply in the banking system has improved in January due to increased government spending witnessed towards the end of December, dealers said.

The Reserve Bank of India's (RBI) open market bond purchases have also helped improve liquidity, they added.

So far, the RBI had bought 370.68 billion rupees of bonds under OMO, through which it aims to inject 480 billion rupees in a month.

Also, demand is likely to stay subdued and help keep a lid on the cash rate as most banks might have already met the mandated reserve needs by now, dealers said.

Banks borrowed 491.65 billion rupees at the RBI's morning repo auction on Thursday. On Wednesday, the central bank had inj! ected 81 6.55 billion rupees via twin repo auction.