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Wednesday, March 3, 2010

Interbank call rates remain steady

Indian interbank call rates were virtually unchanged on Wednesday as surplus funds in the system helped, and traders said lower rates in the collateralised market attracted many banks, pushing the CBLO volumes sharply higher.

At 1:45 p.m., the one-day inter-bank cash was at 3.20/30 per cent, little changed from its previous close of 3.00/25 per cent.

"There is cash in plenty, both in the inter-bank and CBLO markets, which is keeping the rates steady," said a trader at a state-run bank.

"Mutual funds are now keeping a lot of cash, which they are ready to lend as short-term money, as they are about to face redemption pressure by the end of this month."

Traders said banks are borrowing from the cash-flush mutual funds and investing in call money, the RBI reverse repo etc, depending upon their opportunities.

But this abundance may not be there at the end of this month when banks' balances will be drained as companies make their last instalment of taxes in the fiscal year, they added.

The tax outflows, estimated at about Rs 40,000-50,000 crore, is expected to come back to the system via government spending but with a lag of up to two weeks. Banks parked Rs 70,445 crore with RBI at its reverse repo auction on Wednesday.

Total volume in the CBLO was Rs 91,378 crore on Tuesday compared with an average Rs 75,100 crore a day in the previous reporting cycle that ended last Friday. By 1:45 p.m. on Wednesday, it was more than Rs 72,700 crore.

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