Call rates soften on comfortable liquidity
Tracking comfortable liquidity in the system, inter-bank lending rates closed at around 6.5 per cent on the last day of 2008. The rates were a shade lower compared to 7 per cent prevailing in the beginning of the year.
The year was marked by sharp fluctuations when the global economy slipped into a long slowdown. After the collapse of Lehman Brothers in September 2008, global financial markets practically froze as banks refused to lend each other.
The effects of the crisis were felt in India also, resulting in drying up of liquidity. Soon, call rates zoomed past 20 per cent, albeit for a few days.
The Reserve Bank of India (RBI) stepped in and infused liquidity through a series of measures, including cash reserve ratio (CRR) cut and statutory liquidity ratio (SLR) reduction. It released over Rs 120,000 crore into the system.
Money market rates were largely stable over previous day’s levels. The call range was noted at 5.20-6.50 per cent.
The RBI absorbed Rs 47,665 crore under the reverse repo window.
The demand for funds on the first day of 2009 is likely to stay subdued because almost all banks have covered much of their reserve needs for the Reporting Fortnight.
Hence, any pressure on call rates is highly unlikely.