Call Rates Seen In 5.50-5.80% Range

Call money rates are likely to be in a range of 5.50 per cent to 5.80 per cent this week amid easy liquidity in the banking system.

Being the second week of reporting fortnight, the already-lower demand for overnight funds will further decline.

Market dealers said even though there was a possibility of an open-market auction during the week, the rates would not be much affected.

A dealer with a private sector bank, "The money market is flushed with liquidity. And to mop up the excess liquidity, the Reserve Bank of India (RBI) may conduct an open-market operation. However, most of the banks have already covered their cash reserve ratio (CRR) requirements and hence there would not be any rise in the overnight rates."

During this week, there will be an inflow of Rs 153 crore on account of coupon payment on the 10.20 per cent 2005 government paper, apart from payment of CRR interest rates. Both these will further ease the liquidity condition of the banks.

As per the calendar of the RBI, there will be no auction of government paper this week. The next auction will be of a 10-year security for Rs 6,000 crore and a another of 20-year maturity for Rs.2,000 crore, between August 1 and August 6.

A section of the dealers also feels that there could be a cut in the repo rate (which is generally considered as the floor for the call money rate rates) by 25 basis points to 5.50 per cent.

The treasury head of a private sector bank said, "The bids in the repo auction continued to be high, and it calls for further cut in the repo rate. If it happens, the call money rates can dip further."