India call money ends near reverse repo rate, cash ample

India call money ends near reverse repo rate, cash ample

Mumbai: Indian overnight money rates ended near the reverse repo rate of 3.25% on Wednesday as cash surpluses in the system helped banks meet their reserve needs comfortably.

Cheaper money available at the collateralised borrowing and lending obligation (CBLO) also eased pressure on the inter-bank cash rates.

Banks need to report their liabilities to the central bank once in two weeks and keep 5% of their deposit as cash with it for the next 14 days period.

The one-day money closed at 3.20/30%, little changed from its previous closing of 3.25/30%.

“No concerns about cash rates as of now. Money is available in plenty," said Swarajit Dan, trader at State Bank of Patiala.

Traders said the liquidity support is expected to resist any hardening in the cash rates for two-three months more. Regulators need to ensure a record government borrowing for the fiscal year to be through comfortably, they added.

Some analysts said the central bank may start rolling back the liquidity as early as December 2009, as the already pressured consumer prices could pose significant inflationary threat to the economy, amid easy cash conditions.

Overnight rates are supported around the reverse repo rate because banks holding surplus funds could also deploy the same with central bank at that rate in its daily liquidity adjustment auctions.

Banks parked Rs1.42 trillion with the central bank in its reverse repo auction on Wednesday, showing the extent of free cash in the system.

The weighted average rate in the call money market was 3.26%, while in CBLO it was 2.61%, according to the Clearing Corp of India (CCIL).

Volume in the call money market was Rs110.04 billion and in CBLO it was Rs829.95 billion, CCIL data showed.