MUMBAI: Indian overnight cash rates edged higher on Thursday as demand for funds was robust in the first week of the two-week reporting cycle, while a drop in borrowings from the central bank's repo counter indicated a cash crunch was easing.
Banks borrowed 771.70 billion rupees ($14.64 billion) from the Reserve Bank of India under the daily liquidity adjustment facility on Thursday, lower than 815 billion rupees on Wednesday and Tuesday's 1.13 trillion rupees.
At 1:42 p.m. (0812 GMT), the one-day cash rate was at 8.60/8.65 percent, above Wednesday's close of 8.50/8.55.
"Liquidity is definitely better in the system compared to a few weeks back and as of now there is no real pressure on rates," said a trader with a large state-owned bank.
"We should see call rates staying below 9 percent for rest of the week."
Supply in the banking system had tightened in the second half of December due to advance tax payments by companies. Inflows have since picked with government spending on salaries for its employees, traders said.
Market participants expect cash supply to pose no strains as government spending tends to rise before the end of the fiscal year in March.
Call market volume was 131.60 billion rupees, compared with a total of 108.43 billion rupees on Wednesday, data from the Clearing Corp of India showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was 321.69 billion rupees, compared with a total of 414.21 billion rupees in the previous session.
The weighted average rate in the call money market was 8.65 percent, down from 8.83 percent on Wednesday. In the CBLO market, the average rate was 8.48 percent, down from 8.50 percent.
In the inter-bank repo market, the volume was 60.40 billion rupees from 65.81 billion on Wednesday. The weighted average rate was 8.44 percent, down from 8.52 percent.
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