MUMBAI: The overnight cash rate held steady on Tuesday, easing from its early high as demand tapered off, as most banks met their reserve needs in early trades.
At 1:32 p.m. (0802 GMT), the one-day call rate remained unchanged at 8.75/8.80 percent.
On Monday, RBI Deputy Governor Subir Gokarn said cash rates that are 20-25 basis points above the Reserve Bank of India's repo rate of 8.50 percent were an indication of orderly markets.
Typically, banks borrow more in the first week of the two-week reserves reporting cycle to avoid volatile rates in the second week.
The call rate had opened higher on strong demand from banks in a truncated week on account of a local festival on Thursday.
However, following the dip in repo borrowings of banks, call rate came off their early highs.
Banks' borrowing at the RBI's repo window fell to 874.20 billion rupees ($17.48 billion) from 1.11 trillion rupees on Monday.
"After the fall in repo number, it seems some banks have excess liquidity," said a trader with a large state-owned bank.
Some traders said the overnight cash rate could rise to double digits around mid-March when companies withdraw cash from banks to make advance tax payments.
Volume in the call money market was higher at 147.99 billion rupees, from 121.90 billion rupees on Monday, data from the Clearing Corp of India showed. The weighted average rate in the call money market was 8.87 percent, down from 8.89 percent.
Volume in the collateralised borrowing and lending obligation (CBLO) market was 312.06 billion rupees, compared with 545.40 billion rupees in the previous session, with a weighted average rate of 8.50 percent, up sharply from 8.14 percent.
In the inter-bank repo market, volume was 112.30 billion rupees from 89.56 billion rupees on Monday.
($1 = 50 rupees)
1 month ago
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