Inter-Bank Term Rate Plan Flops

The primary dealer had offered to borrow two-month money at 7.75 per cent, but this evoked no response from the market.

Confirming the development, sources in DFHI said they had stopped marketing the concept.

"None of the bankers came forward with the money. When we put the rates on the screen, we got a number of phone calls but no one came park their funds," sources said. The rates have not been available on the screen for sometime as the DFHI was not getting the desired results.

"We have not withdrawn the rates, we will put them out once again. We have stopped telling bankers to park the funds in 60-day money."

 

Disappointed DFHI sources said, "We tried to implement the concept of the Libor in India with an eye to develop the term money market. But banks are not willing to participate," sources said. In fact, banks for a long time have been wanting a term rate which they could use as a benchmark to price their products. But once the rate was offered, they did not participate.

DFHI had started to give quotes for 60-day money from July 1. Call rates on an average were below 8 per cent for these two months and banks could have parked their funds.

Sources said calls will be on the higher side and more volatile by October.

"Banks will all the more shy away from parking their funds with us now that the busy season will start," sources say.

Sources added that banks want to speculate with all their short term funds in the "call" and the "notice" market. "Banks have money, but they will not park their funds," sources said.

Bankers said,