The Hindu Business Line : Call rates surprise market

INTER-Bank call rates today were in the range of 5.5 per cent to 6 per cent intraday, but eased into the range of 4.8-5 per cent towards the end of the day.

The Reserve Bank of India accepted the sole bid in the reverse repo auction worth Rs 5,000 crore. Market participants are surprised by the sudden rise in the call rates over the last two days, but the reasons became slowly apparent. Informed sources said that the sole bidder at the reverse repo auction today, in fact, was SBI.

The State Bank of India, reduced the rates on its domestic term deposits for period ranging from 15 days to 179 days by 25 basis points with effect from August 9. SBI, primarily a lender in the market, has been borrowing funds heavily for the past few days, said dealers. They said the reason behind this could be the outflow on account of withdrawals from the domestic term deposits.

The inflow from the TCS initial public offer also seems to be a factor; market players feel the inflow on this count is being absorbed by banks which are not traditional lenders in the inter-bank market.

Also, Life Insurance Corporation of India has not been lending in the market during this week. Some said there are also withdrawals from Non Resident External deposit accounts after the interest on these deposits was made taxable in Union Budget.

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