Call rate ends up as banks meet 2-day reserve needs

Inter-bank call money rate ended up On Tuesday led by a strong demand for meeting two-day reserve needs amid reluctance by banks to lend on the last day of the financial year, dealers said.

Call money market will be shut Wednesday because banks will be closed for public transactions for reconciliation of accounts for the fiscal year 2008-09 (April-March).

On Tuesday, two-day call rate ended at 4.90-5.00 per cent, up from Monday’s close of 3.70-3.75 per cent for one-day loans. Intraday, call rate touched a high of 5.75 per cent.

CBLOs ended at a weighted average rate of 4.53 per cent, up from 3.51 per cent Monday.

“Lenders were very few On Tuesday because many banks did not want to lend in the call money market as it would impact their balance sheet,” said a dealer at a private bank.

Banks generally don’t lend in call money market on March 31 owing to concerns that it would affect the capital adequacy ratio in their balance sheet.

“So call rate went up because of panic borrowing by a few banks,” the dealer added.