MUMBAI: India's cash rates fell for a third consecutive session on Thursday to take into the account the sharp easing undertaken by the Reserve Bank of India, but tight liquidity conditions kept them above the new repo rate of 8 percent.
Interbank call money rates eased to 8.25/8.30 percent from Wednesday's close of 8.35/8.40 percent.
Traders say these rates will remain above the lending rate by 20-25 basis points in the near-term, despite the Reserve Bank of India's aggressive easing on Tuesday, given the clear signs of liquidity shortages.
In a sign of the crunch, borrowing under RBI's repo facility rose to 1.03 trillion rupees on Thursday, well above central bank comfort levels.
Volume in the call money market was 260.33 billion rupees, compared with 223.22 billion rupees on Wednesday, while the weighted average rate was 8.27 percent versus 8.30 percent previously.
Volume in the collateralised borrowing and lending obligation (CBLO) market fell to 491.15 billion rupees versus 514.86 billion rupees, with the weighted average rate at 7.98 percent, lower than 8.01 percent.
In the inter-bank repo market, volume was 134.86 billion rupees from 147.76 billion rupees, with the weighted average rate at 7.98 percent from 8.04 percent.