Mumbai: Indian cash rates ended steady on Wednesday, but after holding above the reverse repo floor of 3.75% for most of the day, as concerns about tighter cash conditions due to 3G-related outflows weighed.
The two-day inter-bank money ended at 3.80%/90%, unchanged from its previous close.
The market is shut on Thursday for a local holiday.
The call money usually hovers around the reverse repo rate of 3.75% when liquidity is ample.
The weighted average rate in the call money market was 4.03%, while in collateralised borrowing and lending obligation (CBLO), it was 3.90%, according to the Clearing Corp of India (CCIL).
“Most of the banks have good proposals from 3G bidders, and it is reducing banks’ lendable funds in the call money market,” said a senior trader with a state-run bank.
Traders said the tightness in liquidity may continue until the end of June.
By mid-June, another round of outflows —in the form of advance tax payments by companies— is expected to hit the money market. But the funds usually come back to the system via government spending in the next one-two weeks.
Finance secretary Ashok Chawla said on Monday that he does not foresee a liquidity crunch due to 3G flows. The central bank had earlier said that banks could borrow from its repo window at 5.25%, if they were faced with any liquidity issues.
However, banks continued to deploy funds with the central bank via the reverse repo route, although the amount was down drastically, instead of availing the repo facility.
Banks parked Rs5685 crore with the RBI on Wednesday, compared with Rs47530 crore on Friday.
Volume in the call money market was Rs7221 crore and in CBLO it was Rs54247 crore, CCIL data showed.