Ample Funds Set To Keep Call Calm

Call rates will rule in the 7-7.25 per cent band for the better part of the coming week on the back of comfortable liquidity.

Traders, however, do not rule out the possibility of the rates edging marginally higher to the 7.25-7.50 per cent range as demand will get bunched up due to two holidays.

Any further softening in the rates now hinges on whether the Reserve Bank of India (RBI) cuts the bank rate and cash reserve ratio (CRR), dealers said.

"This week the money market will be flat with the demand and supply being evenly matched. With the US Federal Reserve expected to announce a 50 basis points cut in its benchmark rate on October 2, the RBI could also effect a cut in its benchmark rate this time round before the announcement of the credit policy in mid-October to reduce the interest rate differentials," a money market dealer with a private sector bank said.

The liquidity condition should not be unduly affected as the RBI is keeping tabs on the evolving market scenario and will not allow the rates to cross beyond the current levels, he said.

A dealer pointed out that most of the players have covered themselves for three days on Friday and there is unlikely to be any pressure on call rates. The call money market was closed on Saturday as there was no clearing on account of the half-yearly closing for banks. It will again be closed on October 2 on account of Mahatma Gandhi's birth anniversary.

Call rates were ranged around 7.00-7.20 per cent band for the better part of last week and peaked to 9.75 per cent on Friday as most of the large lenders stayed away from the market ahead of the half-yearly closure of accounts of banks on Saturday. The RBI intervened and cooled the rates on Friday by infusing funds (Rs 920 crore) via the reverse repo auction.

Comfortable liquidity prevailed throughout last week as utilisation of the central bank finance came down to Rs 4,570 crore from Rs 6,632 crore at the beginning of the week.