The Hindu Business Line : Call rates soften

OVERNIGHT call rates in the inter-bank money market softened substantially to 3-3.50 per cent towards the end of the trading on Friday, as liquidity conditions have begun showing signs of improvement, said dealers.

Call rates ruling in the range of 4.50-4.80 per cent in the early hours of trading slid post-mid afternoon, after the LAF window was closed for the day, said dealers.

For the past few days call rates have been in the range of 4.60 to 4.80 per cent, off from higher levels of 6-6.50 per cent in the recent past.

"Mutual funds received heavy inflows from the corporate investors which led to higher liquidity in the markets," said a dealer with a private sector bank. Banks were also sitting on substantial surplus funds as witnessed by the higher amounts parked in reverse repo of RBI, she added.

In the 3-day reverse repo, banks parked over Rs 18,000 crore with the RBI, against the range of Rs 4,000 crore to Rs 7,000 crore worth of funds in the reverse repo during the week, said another trader.

"Excess funds available with market participants which did not find way in the reverse repo window were deployed in the call market," said a dealer at a primary dealership firm.

In the CBLO market also rates of overnight lending slid substantially as they were in the range of 1.10 per cent to 4.60 per cent today, against levels of 4.50-4.80 per cent in the recent days.

A fortnight ago, Dr Y.V. Reddy, RBI Governor, said that overnight rates have settled with the easing of pressures on liquidity in the domestic debt market.