Call rate ends above repo rate

The interbank call money rate ended significantly above the Reserve Bank of India’s repo rate of 6.0 per cent for the second straight business day today because of the rush for funds at the beginning of a new reporting fortnight and persistent tight liquidity, dealers said. The one-day call rate ended at 6.75-7 per cent, unchanged from Saturday’s close for two-day loans.

The CBLOs ended at weighted average rate of 5.99 per cent, marginally down from 6.06 per cent Saturday.

Typically, most banks prefer to meet a large part of their reserve requirements for the reporting fortnight in the first week itself.

Given the tight liquidity and strong demand for funds, the overnight rate remained at least 50 basis points above the repo rate for most part of trade.

RBI had to infuse a whopping Rs 89,960 crore through its repo tender today. This liquidity infusion notwithstanding, overnight rates remained firm.

“Liquidity is extremely tight and everyone wants to cover their product needs much earlier. So, the call rate is likely to remain around 7 per cent this week,” said a dealer with a state-owned bank.

Lack of government expenditure also ensured there is no let up in the liquidity tightness. There is no precise estimate of the government’s surplus cash balance.

The central government’s deposit with RBI, which is only a part of the total surplus, has increased for the second consecutive week. It was at Rs 24,410 crore as on October 15.

Most dealers expect the call rate to remain at current levels through the week and borrowings at RBI’s repo tender too are seen remaining high.