CBLO clocks record volumes

The indigenously developed money market instrument of the Clearing Corporation of India Ltd ( CCIL), collateralised lending and borrowing obligation (CBLO), has clocked record volumes of Rs 6,317 crore today.

Banks and primary dealers (PDs) who have the exclusive access to the call money market are borrowing from the CBLO at interest rates below the call rates.

The funds are available in the CBLO market at 4.90-5.15 per cent, call money is ranging over 5.05/5/10 per cent.

The lenders are mainly mutual funds and insurance funds who have limited access to the call market and one day reverse repo ( erstwhile repo) with the RBI fetches 4.75 per cent.

Banks and primary dealers lend or borrow money for day to day money management at the overnight call money market. Non banking players have limited access to it and these are getting phased out.

On the other hand, CBLO is offered as a money market instrument to any players "" banks and non banks "" and is a variant of liquidity adjustment facility provided by the RBI under repo and reverse repo mechanism . It offers the flexibility of selling the securities already offered under CBLO so as to generate more liquidity to the instrument.

Securities offered under CBLO could also be swapped with other securities if the lender of the specific security feels the need of replacing it.

Borrowing in CBLO has increased, official sources said as the outstanding liquidity in the system is slowly receding. The amount subscribed in the reverse repo of RBI is gradually declining from highs of Rs 10,000-12,000 crores to Rs 1000-2000 crores.

Under the changed nomenclature of the RBI, repo is the process through which the RBI injects liquidity from the system while it absorbs liquidity through reverse repos.

Even reverse repos with counterparty other than the RBI are also recording volumes in the range of Rs 10,000-12,000 cores as the rate of interest is much higher at 5-5.5 per cent.

Primary dealers specifically require funds as there is tap sale of ongoing state government loan and upcoming government borrowing programme this week and they have bidding commitment to fulfill.

Banks on the other hand, require money for day to day management as much of the excess liquidity is parked in credit or being made available for upcoming credit demand.