Mumbai: Indian overnight cash rates were above 9% on Monday, on tight cash conditions and higher demand for funds at the beginning of a new reporting period.
There were inflows in the banking system through interest payments on bonds and treasury bill redemptions, but a bond auction due this week is keeping traders cautious.
At 2:40pm call rates were at 9.20-9.25%, off an early high of 9.50% and lower than 9.40-9.50% at close on Saturday. Call rates had ended at 6.25-6.50% on Friday.
“Cash is tight in the system, we had some inflows through interest payments and the t-bill redemptions on Friday, but that was only about Rs50 billion or so, the shortfall is much higher,” a dealer with a private bank said.
“This week again we have some Rs100 billion bond auctions and the weekly T-bill auctions as well,” he added.
Fifty billion rupees came in to the system on Friday through the redemption of 91-day and 364-day treasury bills, with another Rs998 million coming in as interest payment for the 6.20% 2010 government bonds.
The central bank said last week it will sell Rs45 billion of bills on Wednesday and Rs100 billion of 8.24% 2018 and 7.95% 2032 bonds on Friday.
The central bank did not receive any bids at its daily reverse repo auction on Monday, while it pumped in Rs238.10 through its reverse repo auction, highlighting the cash shortage in the banking system.