India Call: Surges as banks refrain from lending on last day of FY20

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Call: Surges as banks refrain from lending on last day of FY20

Tuesday, Mar 31

 

By Vishal Sangani

 

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MUMBAI – The inter-bank call money rate ended sharply above the Reserve Bank of India’s repo rate of 4.40% today because most banks refrained from lending funds on the last day of the financial year, retaining large holdings to dress up their balance sheets, dealers said.

 

The call rate for three-day ended at 4.80%, as against 2.50% on Monday for one-day .

 

Banks are closed on Wednesday for annual closing of accounts, and Indian money markets are closed on Thursday on account of Ram Navami.

 

Usually, banks are reluctant to borrow or lend funds in the inter-bank call market at the year-end.

 

On account of low participation, deals worth 24.75 bln rupees were struck in three-day segment at weighted average rate of 4.83% as against 35.04 bln rupees on Monday.

 

 

The inter-bank call money also remained above the repo rate for most of the day because of lower market participation owing to the 21-day lockdown imposed by the government to contain the spread of coronavirus disease.

 

With financial markets having taken a severe beating because of concern over the impact of the coronavirus pandemic, the RBI has pulled out all stops to infuse liquidity into the banking system, which is already in surplus.

 

The central bank has announced long-term repo operations, purchases under open market operations and offered 1 trln rupees through two rounds of 16-day repos.

 

Currently, liquidity in the banking system is estimated to be in a surplus of 4.84 trln rupees.

 

Following are the highlights of the day:

* The weighted average call rate was 4.29%, compared with 4.23% on Monday

* TREP (Triparty Repo) weighted average rate was 0.01%, against 0.48% on Monday

* Maturity of fixed-rate reverse repo added 6.13 trln rupees to the banking system

 

* On Friday, the three-day call money rate may open around the repo rate of 4.40% due to demand for funds from banks early in the day

* During the day, the call rate is seen at 4.40-4.60%, dealers said.

 

 

CALL RATE

4.80%–Today’s close for one-day loans

4.80%–Today’s open for three-day loans

2.50%–Monday’s close for three-day loans

 

BENCHMARK MIBOR (in per cent)

Mumbai Inter-Bank Offered Rates compiled by Financial Benchmarks India:

 

TENURE

TODAY

MONDAY

Overnight

4.81

4.80

3-day

14-day

5.40

5.42

1-month

5.66

5.70

3-month

5.93

5.93

 


India Call: Surges as banks refrain from lending on last day of FY20

MUMBAI – The inter-bank call money rate was above the repo rate of 4.40% today because most banks refrained from lending funds on the last day of the financial year, retaining large cash holdings to dress up their balance sheets, dealers said.

 

At 0940 IST, the three-day call money rate was at 4.80%, compared with 2.50% at close on Monday for one-day loans.

 

Banks are closed on Wednesday for annual closing of accounts, and Indian money markets are closed Thursday on account of Ram Navami.

 

“This always happens on the last day of the year, some banks will not lend in call because they want to window dress their books.” a dealer with a state-owned bank said.

 

The call rate may also remain above the repo rate during the day due to firm demand for funds because of lower market participation owing to the lockdown imposed by the government.

 

With financial markets having taken a severe beating because of concerns over the economic impact of coronavirus pandemic, the RBI is pulling out all stops to infuse liquidity in a banking system, which is already swimming in surplus liquidity.

 

The central bank has announced long-term repo operations, bond purchases under open market operations and offered 1 trln rupees through two rounds of 16-day repos.

 

Liquidity in the banking system is estimated to be in a surplus of 4.84 trln rupees.

 

The RBI to hold three-day variable rate repo auction for 250 bln rupees today.

 

Today, the central bank will also conduct an auction of 77-day and 84-day cash management bills for 400 bln rupees each.

 

Following are the other highlights:

* The weighted average call rate was 4.81% against 4.23% on Monday

* The weighted average rate for triparty repo was 0.49% against 0.48% on Monday

* The reversal of fixed-rate reverse repo will add 6.13 trln rupees to the banking system

* The call rate is seen in a range of 4.40-4.60% during the day. (Vishal Sangani) 

End

 

Edited by Akul Nishant Akhoury

 

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