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MUMBAI: Indian overnight cash rates rose to more than nine per cent on Monday as liquidity tightened after last week's tax outflows, and pressured by banks to meet their reserve requirements.
Traders said suspected intervention by the central bank in the foreign exchange market by selling dollars in the past few days to halt the rupee's slide also affected rupee funds with banks.
Borrowings by banks from the Reserve Bank of India's repo counter jumped to 1.66 trillion rupees ($31.4 billion) on Monday, the highest since at least October and up from 1.48 trillion on Friday.
At 2:16 p.m. (0846 GMT), the one-day cash rate was at 9.25/9.35 per cent, higher than Friday's close of 8.80/90 per cent for three-day loans. On Saturday, the cash rate had closed at 9.00/9.10 per cent in an illiquid market.
“Tax outflows have just happened and the RBI's intervention in the dollar-rupee market has hit liquidity hard,” said a dealer with a large state-run bank. “These along side the usual high borrowing in the first week of reporting fortnight will put some pressure on call rates.”
Advance tax payments by the top 100 companies in Mumbai for October-December rose 10 per cent from the same period last year, according to a government source with direct knowledge of the matter.
Call market volume rose to 195.36 billion rupees on Monday from a total of 167.01 billion on Friday, Clearing Corp of India data showed. In the collateralised borrowing and lending obligation (CBLO) market, the volume was at 184.39 billion rupees, compared with a total of 243.55 billion in the previous session.
The weighted average rate in the call money market was at 9.23 per cent, up from 8.92 per cent on Friday. In the CBLO market, the average rate rose to 8.74 per cent from 8.46 per cent.
In the inter-bank repo market, volumes were at 98.77 billion rupees, compared with a total of 129.08 billion on Friday. The weighted average rate was at 8.76 per cent up from 8.68 per cent.
