Signs Of Revival In Term Money Market

The term money market has shown signs of revival with a handful of deals being reported in the recent past. Andhra Bank has placed Rs 10 crore for six months at a rate of 11.25 per cent.

Global Trust Bank has been successful in raising three-month money at rates ranging from 8.5 per cent to 8.75 per cent.

The size of such deals is, however, lower at Rs 5 crore.

After the flurry of activity consequent to the credit policy when the Reserve bank of India (RBI) scrapped the reserve requirements on inter bank liabilities the quotes offered in the term money market dried up once the call rates went up to over 9 per cent in the first week of May after the sale of ten-year state government paper. Now that there is sufficient liquidity in the system and the rates have come down banks are willing to take a position for three to six months.

 

There has also been an impressive growth of Rs 10,080 crore in the aggregate deposits of the banking system and some of the surplus banks are on lending the same to foreign banks and private sector banks who do not have a sizeable deposit base.

The treasury head of a private sector bank said, There are problems of exposure limits faced by banks and this has contributedto the absence of banks from this market. While few banks have been floating two way quotes for term money markets, they have not been following proper evaluation procedures before making the quotes to the borrowers.