March 1, 2012 / 12:11 PM / 6 years ago

India cash rate ends steady, seen moving higher

 (Updates to close)	
 MUMBAI, March 1 (Reuters) - The Indian overnight cash
rate ended steady on Thursday, and traders expect it to rise
further due to a continuing liquidity squeeze.	
 The one-day call rate closed steady at 9.00/9.05
 Banks borrowed 1.92 trillion rupees ($39.02 billion) -- an
all-time high -- from the Reserve Bank of India's repo counter
under the liquidity adjustment facility. In the previous
session, banks borrowed $1.80 trillion rupees.	
 The lenders also borrowed 750 million rupees from the
marginal standing facility (MSF) on Wednesday, where they can
tap funds at 100 basis points higher than the repo rate of 8.50
 "There is product covering happening, and with no government
spending coming in, the liquidity is tight," a dealer with a
private bank said.	
 "The cash rate touching 9.25 percent in this reporting cycle
 is a distinct possibility," the trader said.	
 With the financial year drawing to a close, banks will try
to shore-up deposits to improve their balance sheet, which will
put further pressure on liquidity, dealers said.	
 A rise in deposits will lead to higher cash reserve
requirements. The cash reserve ratio (CRR), or the share of
deposits banks must hold with the central bank, is currently
5.50 percent.	
 Traders said the cash rate could inch closer to the MSF rate
in mid-March when companies make their advance tax payments.	
The volume in the call money market was 222.61
billion rupees, compared with 201.07 billion rupees on
Wednesday, data from the Clearing Corp of India showed.	
 The weighted average rate in the call money market was
steady at 9.00 percent.	
 The volume in the CBLO market was 380.18 billion rupees,
compared with 404.31 billion rupees in the previous session.	
 The weighted average rate in the CBLO market was 8.83
percent, up from 8.58 percent on Wednesday.	
 In the inter-bank repo market, the volume was 108.48 billion
rupees, compared with 130.18 billion previously.	
($1 = 49.2 rupees)	
 (Reporting by Shamik Paul; Editing by Aradhana Aravindan)	
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