MUMBAI: The Indian cash rate rose on Monday, hovering above the Reserve Bank of India's key lending rate of 8.50 percent, as demand for funds picked up due to a continuing liquidity squeeze in the holiday-shortened week.
Banks continued to knock at the RBI's repo window to meet their needs at the beginning of the latter half of a two-week reporting cycle, with the financial markets closure on Thursday on account of a local festival also fuelling demand.
At 12:41 p.m. (0711 GMT), the one-day call rate was at 8.70/8.80 percent, up from 8.40/8.45 percent on Friday for three-day loans. The cash rates had settled at 8.90/9.00 percent on Saturday for two-day loans in thin trade.
Banks borrowed 1.11 trillion rupees ($22.29 billion) from the RBI's one-day repo counter, well above the central bank's indicated comfort level of 600 billion rupees. Last week, the repo borrowings touched a record 1.92 trillion rupees.
Robust demand is expected to sustain as liquidity could tighten further as corporates make advance tax payouts around mid-March and as banks rush to shore up their balance sheets before the end of the 2011/12 fiscal year on March 31.
Volume in the call money market was 109.50 billion rupees, compared with 175.05 billion rupees on Friday, data from the Clearing Corp of India showed.
The weighted average rate in the call money market was 8.92 percent, lower than 9.08 percent on Friday.
Volume in the collateralised borrowing and lending obligation (CBLO) market was 317.79 billion rupees, compared with 438.66 billion rupees in the previous session, with a weighted average rate of 8.48 percent, up from 8.27 percent.
In the inter-bank repo market, volume slipped to 87.32 billion rupees, from 99.97 billion rupees on Friday.
Comments
Comments are closed for this article.