Overnight rates at four-month low

RBI swap windows led to rise in liquidity

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Adequate liquidity in the system has led to a sharp fall in call money rates and the rate of collateralised borrowing and lending obligation (CBLO).

On Thursday, the weighted average call money rate stood at 7.95 per cent, a four-month low, compared with 8.69 per cent on Wednesday. On July 23, the rate stood at 7.17 per cent. The weighted average CBLO rate stood at 8.28 per cent on Thursday, against 8.63 per cent on Wednesday.

“Call money rates fell because tomorrow is a reporting Friday. Besides, banks are in the process of converting their dollar swaps from RBI into rupees. RBI is shut on Saturday, owing to which banks do not want to wait for the last moment to convert these into rupees. The window is open till November 30. Banks are deploying this money in the call money market, due to which rates have fallen sharply. CBLO rates are falling because there is a lot of redemption of certificates of deposits and there aren’t fresh issuances, due to which fund managers are investing in CBLO,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank, and chairman of Fixed Income Money Market and Derivatives Association of India.

However, these rates may again rise next month. “Rates fell because tomorrow is a reporting Friday and most banks would have covered their requirements. The deadline for the next instalment of advance tax is mid-December. At that time, there will be outflow of funds, owing to which short-term rates will rise again,” said S Srinivasaraghavan, head of treasury, Dhanlaxmi Bank.

Earlier this week, RBI had said banks had received about $25 billion from the special concessional swap windows for deposits by non-resident Indians and overseas foreign currency borrowings.

The central bank had announced the swap windows for foreign currency non-resident (bank) deposits and overseas borrowings by banks on September 4, after Raghuram Rajan took charge as RBI governor.