Call rates likely to remain in 4.50%-5.00% range

By KV Ramesh

Call rates are expected to range between 4.50% and 5.00%. Call rates were steady around the reverse repo rate of 4.50% on Friday as easy liquidity conditions prevailed. Banks have parked funds of Rs 31,140 crore with RBI on Friday.

The total outflow on account of state loans, treasury bills auctions would be Rs 5,300 crore and Rs 3,000 crore, respectively.

Advance tax outflow of around Rs 50,000 crore is likely to impact the liquidity towards the second fortnight of the month. We expect no spike in call rates through this week, as the system has ample liquidity.

Advance tax payments may tighten liquidity conditions after next week. CBLO rates were seen trading around 4.10% as mutual funds parked surplus funds. The move eased pressure on inter-bank call rates. Last week overnight index swaps also fell as the outlook on liquidity improved.

Liquidity improved on account of government spending also. The yield on the three-month CD was steady at 7.05%. Domestic banks have issued CDs worth Rs 6,995 crore last week compared with Rs 19,255 crore a week earlier. We expect the CPs & CDs to trade in the same range this week.

(The author is General Manager, Integrated Treasury of Lakshmi Vilas Bank)