India cash rates up on rate move; repo bids top 1 trillion

India cash rates up on rate move; repo bids top 1 trillion

Mumbai: Indian cash rates rose on Friday as supply tightened due to advance tax outflows and lenders demanded a higher rate after the central bank raised repo rate by 25 basis points.

At 3:14pm, the three-day inter-bank cash rate was at 8.10/8.20%, higher from Thursday’s close of 8.00/8.10% for one-day loans.

A further rise was, however, arrested as the Reserve Bank of India’s move had been discounted and banks had borrowed early on at lower rates to meet reserve needs, traders said.

The sharp rise in subscriptions at the RBI’s repo counter over the past few days could be an indication of banks’ strategy of playing safe, they said.

Banks on Firday borrowed a whooping 1.02 trillion from the RBI’s three-day repo auction, up from 79,350 crore on Thursday and 58,980 crore on Wednesday.

This is for the first time since June 30 that the central bank has had to inject over 1 trillion via repo in a single auction.

Earlier on Friday, the RBI raised interest rates for the 12th time in 18 months and surprised markets by sticking with its anti-inflationary stance even as growth slows in Asia’s third-largest economy and policymakers elsewhere focus on reviving flagging demand.

Volumes in the three-day call market were at 16,537 crore against 15,652 crore on Thursday, Clearing Corp of India data showed.

In the CBLO market, volumes were at 40,890 crore, against 45,003 crore on Thursday.

The weighted average rate in the call money market was at 8.13%, higher from 8.07% on Thursday, while that in the CBLO market was at 8.01% from 7.98%.

In the inter-bank repo market, volumes were at 7,155 crore versus 13,297 crore on Thursday, and the weighted average rate was steady at 8.02%.