Verma Sees Call Rates Heading South

Leading bankers expect the call money rates to cool in two weeks and the steps taken to check volatility in the forex market to be rolled back in the next two months.

State Bank of India chairman M S Verma said, The call rates will cool as the market mismatches will be evened out soon. However, some banks which face pressure on their cost of deposits will hike their prime lending rates.

Verma said more and more banks would increase their lending rates if they found their margins coming under pressure due to an increase in the cost of borrowing. However, he added, As of now, there is no move to increase the PLR of State Bank.

 

Union Bank of India CMD A T Pannirselvan said the Reserve Bank was expected to roll back its tight liquidity measures soon. The interest rates in the interbank market would also ease, he predicted.

Bankers expect call rates to come down since most of the CRR requirements would have been met and other mismatches would have been bridged. Besides, SBI has been only a marginal lender in the market so far. However, Verma hinted that SBI might step up its lending activity in the call market, which would further cool rates.

Further, the banking systems rupee resources will be augmented by Rs 1908.98 crore between January 28 and February 5, which should cool calls rates. Another Rs 635 crore will be generated from maturing of 364 day T-bills, Rs 300 crore from 91-day T-bills and Rs 973.98 crore on account of coupon flows from government securities.

An estimated Rs 635 crore will flow in on January 29 alone on account of maturing of 364-day T-bills. Another Rs 271.25 crore is expected the same day through coupon flows.