Call rates rise on tax outflows
Weekly wrap up: Call rates rise on tax outflows The inter-bank call rates on September 14, rose to 1% -7.40% with a turnover of Rs 107.41 billion on tight liquidity conditions, due to the outflow of advance tax payments. The amount outstanding under standing liquidity adjustment facility available with the RBI was Rs 0.91 billion at 7.75%, on Sep. 14. Overnight call rates changed at 5.50-7% on Sep. 19, 2007, wherein the weighted average rate (WAR) was seen at 6.47% with a turnover of Rs 143.02 billion. Further, 1-day CBLO (collaterized borrowing and lending obligation) operations fetched Rs 320.88 billion at 6.07% on September 19. The interest rate range was between 5.97-6.30% on the same day. The Reserv e Bank of India (RBI) absorbed Rs 72 billion via 1-day reverse repos on Sep. 20, 2007. At the auction conducted under liquidity adjustment facility, the central bank received 7 bids for 1-day reverse repos which were all accepted. The call rates stood at 5.50-7.40% on Sep. 20, 2007, weighted average rate (WAR) was seen at 6.40% with a turnover of Rs 135.83 billion. This week call rates shot up, followed by dearth of funds in the liquidity system on account of outflow of funds. Until now, the central bank was in the practice of using the reverse window to earn additional income on idle cash. On Friday (September 21), in attempt to ease the adjustment of short-term liquidity, RBI used the repo window. This window enables collateralized short-term borrowing and lending through sale/purchase operations.
During the week, interbank call rates scaled above 7% on account of continued liquidity shortage on account of advance payment of corporate taxes of Rs 350 billion.
The Reserve Bank of India (RBI) absorbed Rs 12 billion via 3-day repos on Sep. 21, 2007.
At the auction conducted under liquidity adjustment facility, the central bank received 1 bid for 3-day repos, which was accepted. These repos are traded at a fixed rate of 7.75%.
