Cash rates end steady as demand slackens

31/12/2011 07:15 AST

Indian overnight cash rates ended unchanged as demand from banks eased towards the end of the two-week reporting period on Friday.

The three-day cash rate closed at unchanged at 8.50/8.60 percent. It touched a high of 9.20 percent in the day.

"Demand was pretty strong today, but going forward, we expect a slight improvement in the liquidity situation because of government spending," a trader with a private bank said.

Banks borrowed a lower 1.15 trillion rupees ($21.7 billion) from the RBI's liquidity adjustment facility compared with 1.17 trillion rupees on Thursday.

Dealers said month-end spending by the government towards payroll and subsidies is expected to improve the liquidity condition and keep a lid on the cash rates in coming days.

Call market volume was at 204.98 billion rupees, compared with a total of 171.61 billion rupees on Thursday, data from the Clearing Corp of India showed.

In the collateralised borrowing and lending obligation (CBLO) market, the volume was 194.85 billion rupees, compared with a total of 407.38 billion rupees in the previous session.

The weighted average rate in the call money market was at 8.91 percent, a touch lower than 8.95 percent on Thursday. In the CBLO market, the average rate fell to 6.99 percent from 7.72 percent.

In the inter-bank repo market, volumes were at 85.54 billion rupees, compared with a total of 78.75 billion on Thursday. The weighted average rate was at 8.39 percent from 8.56 percent.

Reuters