Tax Outflows To Perk Up Call

Call money rates are expected to firm up in the coming week following a liquidity squeeze on account of advance tax outflows on June 15. The call rates will rule in the 7.75-8.00 per cent level for most of next week.

The overnight call rates were relatively high through out the last week in the run up to the advance tax outflows on June 15 due to reporting Friday considerations and big lenders quoting high rates despite ample liquidity in the inter-bank market.

However, dealers are expecting the call rates to be capped at the 8 per cent level next week with the Reserve Bank of India (RBI) conducting reverse repo auction to inject liquidity into the system at 8.50 per cent.

 

"The call will inch up to the 8 per cent level as the coming week happens to be the first half of the reporting fortnight and banks will be inclined to build products in fulfillment of their reserve requirements," a dealer with a private sector bank said.

In the event of the overnight call rates shooting up, the apex bank is likely to infuse liquidity through reverse repo and standing liquidity support, said a dealer with a primary dealing firm.

Banks will adopt a wait-and-watch approach till a clear indication comes from the RBI regarding interest rate movements.

During the week, there will be an inflow of Rs 1859.65 crore into the banking system on account of redemptions of treasury bills and coupon payments on government securities falling due. The indicative outflows on account of auction of the 91-day Treasury Bill on June 22 amounts to Rs 250 crore.