Call Interest Seen In 6.80%-7.25% Band

Call money rates are likely to hover in the range of 6.80 per cent to 7.25 per cent during the week on the back of easy liquidity in the banking system.

Dealers said this week being the first of the new reporting fortnight, demand for overnight money will be higher, but as there is no other investment opportunity excepting in government securities, the system will remain funds flushed.

"Last weekend was a long one due to which there will be bunched up demand for money early this week. However, as the banks, especially the public sector banks, have enough liquidity, the call rates will remain around the seven per cent level only."

The liquidity in the system is unlikely to be disturbed except the state loan auction. On the other hand there will be Rs 2,070.7 crore of inflow in the system. This will help market to remain afloat.

A dealer with a new private sector bank said: "we do not expect any auction of government paper.

But if it comes, there is enough liquidity to subscribe it. The redemption inflow will make the liquidity condition easier, but there will be a bit more demand in the beginning of the fortnight."

The call market was closed on last Monday on the account of public holiday. On Friday, which was the reporting day, the rates were in the range of 6.40 per cent to 6.65 per cent.

Dealers said that all banks had covered their position well in advance and hence the demand was very thin.

The only concern in the call money market during this week will be the India-Pakistan border situation and its impact on the rupee.

Said the treasury head of a private sector bank: "The rupee is expected to remain weak during this fortnight due to the dollar buying by the public sector banks. In that case the call rates will be further easier. However, if the rupee falls due to the border uncertainty, then the call rates may shoot up as well."