The Indian overnight cash rate rose on Tuesday due to a cash shortfall in the banking system after local companies paid advance taxes. Subdued demand for funds, however, kept a lid on the rates, traders said.
Rush for funds is typically lower in the second week of the two-week reserve reporting cycle. Most banks must have maintained higher-than-necessary reserve requirements last week, expecting the outflows and also to reduce exposure to any volatility this week.
The one-day call rate ended at 8.95/9.05 percent, compared with 8.75/8.80 on Monday. "Rates will hover around these levels until next week unless there is some really big unforeseen hit on the system," said a trader with a large state-run bank.
Most traders concur with this view since the tax outflows are expected to return next week in the form of government spending for employee salaries and subsidy payments.
The cash infused through a cut in banks' cash reserve ratio, or the share of deposits banks must hold with the central bank in cash, also deflected the pressure due to the tax outflows, traders said.
The CRR cut that came into effect on March 10 is estimated to have released about 480 billion rupees ($9.52 billion) into the banking system.
Banks borrowed 1.50 trillion rupees from the central bank's repo counter under the liquidity adjustment facility on Tuesday, lower from 1.60 trillion on Monday.
Volume in the call money market was 207.41 billion rupees, compared with 275.04 billion rupees on Monday. The weighted average rate was steady at 8.95 percent.
Volume in the collateralised borrowing and lending obligation (CBLO) market was 424.88 billion rupees, lower than 510.48 billion rupees on Monday, with a weighted average rate of 8.60 percent, from 8.54 percent in the previous session.
In the inter-bank repo market, volume was 129.02 billion rupees, from 117.60 billion rupees in the previous session.
News Bureau,
Rush for funds is typically lower in the second week of the two-week reserve reporting cycle. Most banks must have maintained higher-than-necessary reserve requirements last week, expecting the outflows and also to reduce exposure to any volatility this week.
The one-day call rate ended at 8.95/9.05 percent, compared with 8.75/8.80 on Monday. "Rates will hover around these levels until next week unless there is some really big unforeseen hit on the system," said a trader with a large state-run bank.
Most traders concur with this view since the tax outflows are expected to return next week in the form of government spending for employee salaries and subsidy payments.
The cash infused through a cut in banks' cash reserve ratio, or the share of deposits banks must hold with the central bank in cash, also deflected the pressure due to the tax outflows, traders said.
The CRR cut that came into effect on March 10 is estimated to have released about 480 billion rupees ($9.52 billion) into the banking system.
Banks borrowed 1.50 trillion rupees from the central bank's repo counter under the liquidity adjustment facility on Tuesday, lower from 1.60 trillion on Monday.
Volume in the call money market was 207.41 billion rupees, compared with 275.04 billion rupees on Monday. The weighted average rate was steady at 8.95 percent.
Volume in the collateralised borrowing and lending obligation (CBLO) market was 424.88 billion rupees, lower than 510.48 billion rupees on Monday, with a weighted average rate of 8.60 percent, from 8.54 percent in the previous session.
In the inter-bank repo market, volume was 129.02 billion rupees, from 117.60 billion rupees in the previous session.
News Bureau,
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