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MUMBAI: The Indian overnight indexed cash rate eased to around the Reserve Bank of India's repo rate on Tuesday as demand eased towards end of the day.
The one-day cash rate closed at 8.50/8.60 per cent, compared with Monday's close of 9.00/9.05 per cent.
“Demand is pretty strong as banks are building positions in the first week of the new reporting fortnight,” said a trader with a state-run bank.
Demand is typically strong in the first week of the two-week reporting cycle as most banks prefer to meet reserve needs as soon as possible in order to cut exposure to possibly volatile funding rates in the later half due to last-minute flows.
Banks borrowed 1.13 trillion rupees ($21.24 billion) from the Reserve Bank of India's repo counter under the liquidity adjustment facility, down from 1.15 trillion rupees on Monday.
Traders said the cash rate was likely to soften next week as tight liquidity conditions in the banking system should ease as a result of government spending.
Call market volume was at 184.05 billion rupees, compared with a total of 206.40 billion rupees on Monday, data from the Clearing Corp of India showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was at 312.26 billion rupees, compared with 296.04 billion rupees in the previous session.
The weighted average rate in the call money market was 8.91 per cent, down from 8.99 per cent on Monday. In the CBLO market, the average rate was 8.45 per cent, down from 8.59 per cent.
In the inter-bank repo market, volumes slipped to 65.50 billion rupees from 81.73 billion on Monday. The weighted average rate was 8.59 per cent, down from 8.60 per cent.
