Ample Funds To Keep Call Rates Soft

Liquidity will continue to keep call rates stable around 6.50-6.75 per cent during the week. Money market dealers said demand will be low as it is the second week of the reporting fortnight.

A treasury head of a private bank said: "There is no problem with liquidity. Moreover, there is an huge unused export credit facility lying with the Reserve Bank of India. All these will keep overnight rates stable and soft."

Overnight money was quoting at 6.50-6.65 per cent on Saturday amid ample liquidity. A dealer with a private bank said: "Most of the banks have already covered their cash reserve requirement and, hence, there was hardly any demand for funds. This kept call around the refinance rate of 6.50 per cent."

There will be an inflow of Rs 1,091.3 crore on account of coupon payments on government securities, which will further boost liquidity. Dealers are not expecting any auction during the week to mop up the money.

A primary dealer said: "There was an auction of Rs 5,000 crore last week. We do not see the chance of another auction within a such a short period." Dealers, however, said the market has enough liquidity to absorb any auction of Rs 8,000-10,000 crore.

A dealer with a foreign bank said: "The call rates even can come down to 6.25-6.30 per cent just ahead of the close of reporting Friday. The average repo transaction nowadays is around Rs 6,000 crore. If that is the indication of good liquidity, there is no chance of call rates going up substantially even after a big auction."