Call rates stay above 10 per cent

Call rate ended firm above 10 per cent on Wednesday as banks borrowed to cover their reserve needs for two days, dealers said.

The two-day call rate ended at 10.25-10.50 per cent compared with 10.25-10.65 per cent on Tuesday for one-day loans.

CBLOs ended at a weighted average rate of 9.59 per cent on Wednesday compared with 9.68 per cent on Tuesday. A few deals were struck at 9 per cent on Wednesday, but the weighted average call rate remained around 10.53 per cent. Banks covered two-day reserve needs because Thursday is a holiday for Dussehra.

“Liquidity has been tight owing to lack of government spending and banks’ borrowing needs were also high as they covered reserves for two days. This has kept call above 10 per cent on Wednesday,” said a dealer with a state-owned bank. The rate was well above the Reserve Bank of India’s repo rate of 9 per cent even in the second week of the reporting fortnight as banks had less days in the current cycle to meet reserves. There were only nine trading days this fortnight instead of the usual 12.

 

Tight liquidity has also added pressure on call rate on Wednesday. Banks expect tightness in liquidity to continue until inflows start through government expenditure. Firm call rate and tight liquidity prompted banks to borrow heavily from RBI’s repo tenders. Dealers said lack of supply in the CBLO market has also forced banks to cover much of the reserve needs through the central bank’s repo tender on Wednesday. on Wednesday, banks borrowed Rs 81,135 crore from RBI’s twin repos as against Rs 63,285 crore on Tuesday.