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Call rates edge higher as banks scramble to fulfill their fortnightly requirements

14 Mar 2014 Evaluate

Interbank four day call rates, the rates at which banks borrow short-term funds from each other, were trading substantially higher at 8.50/8.55% against previous close of 7.00/7.05% on Thursday as banks rush to meet reserve needs ahead of the public holiday on Monday and also as liquidity is also expected to tighten next week on the back of corporate advance tax outflows.

To ensure adequate liquidity in the banking system at a time when the quarterly advance tax outgo is coinciding with a Rs 30,000-crore term repo maturity, Reserve Bank of India (RBI) on Thursday evening announced that government would be buying back Rs 15,000 crore worth of bonds maturing between May and February 2015 by utilizing "its surplus cash balances" with RBI.

The buyback, which would take place on March 18, would purely be ad hoc in nature, while the bonds that the government will buyback are 6.07%, 2014 bond, 10%, 2014 bond, 7.32%, 2014 bond, 10.50%, 2014 bond, 7.56%, 2014 paper, 11.83%, 2014 bond and 10.47%, 2015.

The banks via Liquidity Adjustment Facility (LAF) borrowed Rs 36473 crore through repo auction and on March 14, 2014. In the previous session, banks using LAF facility borrowed Rs 34211 crore through repo auction and parked Rs 10588 crore via reverse repo window on March 13, 2014.

The overnight borrowing rates touched a high and low of 9.15% and 8.25% respectively.

According to the Clearing Corporation of India (CCIL), the weighted average rate (WAR) in the call money market was at 8.51% on Friday and total volume stood at Rs 30222.04 crore, so far.

As per CCIL data, WAR in the CBLO (Collateralized Borrowing and Lending Obligation) market was at 8.66% on Friday and total volume stood at Rs 46803.30 crore, so far.

The indicative call rates which closed 7.00/7.05% on Thursday were contributions made from Andhra Bank, AXIS Bank, Bank of America, Bank of Baroda, Bank of India, Canara Bank, J P Morgan Chase, Citibank N.A., Corporation Bank, Credit Agricole Bank, Indusind Bank, ICICI Bank, ICICI Securities, IDBI Bank, Jammu and Kashmir Bank, Punjab National Bank, RBS, Societe Generale, Standard Chartered, so far.

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