Crr Cut May Ease Call Rates Afresh

Call money rates are expected to be in a range of 6.40 per cent to 6.80 per cent during the week.

Dealers said there is enough liquidity in the banking system and it will remain so throughout, though demand for cash will be slightly higher as it is the first week of the reporting fortnight.

The credit policy to be announced on Monday may also affect call money rates. A dealer with a private sector bank said: "If the RBI cuts the cash reserve ratio (CRR), the liquidity condition will improve further and it will put a downward pressure on the overnight rates. In addition to the CRR cut, if the central bank cuts the bank rate as well, the expectation of a repo rate cut will build up which can have further downward impact on the call money rates." The repo rate at present is at six per cent and it acts as a floor to the call money rates.

 

Call money rates were in the band of 6.45 per cent to 6.85 per cent on Saturday amid steady supply of liquidity.

Money market dealers said the demand was on the higher side on the very first day of the reporting fortnight. However, there was no volatility.

During the week, there will be an inflow of Rs 1,754.5 crore of liquidity in the market on account of coupon payment on government securities and state development loans.

But this will be more than offset by the Rs 6,000 crore 10-year paper auction during the week.

The auction is not expected to affect the call rates as the amount is small in the context of the liquidity abounding. Moreover, the auction is also according to the indicative calendar released by the central bank, which means the market will have factored that in already.