MUMBAI: India's inter-bank call money rate eased on Tuesday on signs of an improvement in liquidity tightness in the banking system, but heavy borrowing continued at the start of the new two-week reporting cycle keeping the rate higher than the repo rate.
Concerns about the government's record debt-sale programme will continue to weigh on the call rates and keep it at current levels, higher than the repo rate of 8.50 percent, traders said.
The RBI will auction 140 billion rupees of treasury bills on Wednesday, followed by 150 billion rupees of bonds on Friday. and The one-day call rate closed at 8.75/8.80 percent, lower than Monday's close of 8.80/8.90 percent.
Traders said in the run-up to the annual monetary policy announcement on April 17, RBI will be closely monitoring the borrowings from the repo window to understand the market dynamics given the heavy supply line-up.
Liquidity conditions in the banking system have improved on government spending in the new fiscal year that began on April 1, although this week's debt sales are seen weighing.
Banks borrowed 909.05 billion rupees from the central bank's repo window on Tuesday compared with 1.07 trillion rupees on Monday.
Volume in the call money market was 243.93 billion rupees, compared with 268.49 billion rupees on Monday, while the weighted average rate was 8.97 percent versus 8.99 percent previously.
Volume in the collateralised borrowing and lending obligation (CBLO) market was 502.47 billion rupees, higher than 453.15 billion rupees on Monday, with the weighted average rate at 8.35 percent, higher than 8.07 percent previously.
In the inter-bank repo market, volume was 115.97 billion rupees with the weighted average rate at 8.40 percent.
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