MUMBAI: Indian cash rates rose on Thursday as demand for funds was strong in the first week of the two-week reporting cycle, as most banks prefer to cover reserve needs as early as possible to avoid volatile rates later.
At 1:14 p.m. (0744 GMT), the one-day cash rate was 9.20/9.30 percent, up from Wednesday's close of 8.50/8.60 percent.
"Liquidity has not eased as expected and banks' reserve requirements have climbed due to balance sheet expansion in December, before the quarter end account closing," said a dealer with a large state-owned bank.
"Therefore, call rate is likely to hover above the Reserve Bank of India's repo rate for rest of the week."
Bank borrowings from the RBI's repo auction under the daily liquidity adjustment facility fell for the first time in four days to 1.51 trillion rupees ($29.96 billion) on Thursday from 1.57 trillion rupees on Wednesday and Tuesday's 1.55 trillion rupees.
Call money market volume was 154.58 billion rupees, compared with a total of 159 billion on Wednesday, data from the Clearing Corp of India showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was 181.38 billion rupees, compared with a total of 307 billion rupees on Wednesday.
The weighted average rate in the call money market was 9.27 percent, down from 9.35 percent on Wednesday. In the CBLO market the average rate was 8.62 percent, slightly up from 8.60 percent in the previous session.
In the inter-bank repo market, volume was 71.49 billion rupees compared with Wednesday's total of 70.81 billion. The weighted average rate was 8.79 percent, down from 8.88 percent previously.
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