Liquidity tightens on higher CRR demand

MONEY MARKET ROUND-UP

Liquidity has started showing signs of tightness at the beginning of the reporting fortnight for CRR requirements. The cash reserve ratio is the portion of the total deposits garnered by banks over a fortnight and deposited with the RBI as a statutory obligation.

Of the total funds to be maintained, a bank needs to have at least 70 per cent on any given day of the fortnight.

The liquidity infused by the RBI under its repo window shot up to around Rs 24,000 crore as against Rs 3000-4000 crore last week. The call rates at which the banks lend and borrow funds for their daily requirements went up to a high of 9.30 per cent from 4.5 -5 per cent last week.

According to dealers, while banks are not facing liquidity tightness, they are reticent about lending on fears of unseen circumstances. Besides, the government has already announced the auction of two government papers to raise around Rs 10,000 crore from the system.

Forex: Weak rupee

The spot rupee opened weaker at 42.43/45 on Monday compared to a closing of 42.36/38 last week. According to dealers, the foreign exchange rate tracked the equity market, which fell on global cues following the weak non-farm payroll data from the US.

There was heavy dollar selling by foreign banks, said a dealer. After gaining an intraday high of 42.34, the rupee weakened and closed at 42.49, following heavy dollar-buying by oil companies.

Oil companies have been frantically buying dollars as the RBI may not resume the direct forex purchase window for oil firms.