Overnight rates fall on govt spending

Call rate ends at 7%, while the weighted average was 7.91%

Overnight rates, including those for call money and collateralised borrowing and lending obligation (CBLO), eased due to government spending.

According to the Clearing Corporation of India, the call money rate ended at seven per cent on Monday, while the weighted average stood at 7.91 per cent. On Friday, the weighted average rate stood at 8.73 per cent. The CBLO rate ended at 7.01 per cent on Monday, while the weighted average was 7.95 per cent.

The CBLO weighted average rate stood at 7.56 per cent on Friday.

“At the beginning of the month, government spending would have taken place due to which overnight rates eased. But going forward, the overnight rates will be about eight per cent, a level close to the repo rate,” said Ramanathan K, executive director and chief investment officer, ING Mutual Fund.

Last month, the Reserve Bank of India had raised the repo rate by 25 basis points to eight per cent to tame inflation.

The Street believes government spending may slow, as it is trying to restrict its fiscal deficit to 4.8 per cent of gross domestic product.

At that point, overnight rates are likely to rise. Also, by the end of the quarter, liquidity will tighten, resulting in higher overnight rates.