Call rates stay tight

Liquidity within the banking system saw a minor blip on account of advance tax outflows. For the first time in five months, the Reserve Bank of India was seen lending funds under the repo window at the second session of liquidity adjustment.

The RBI on Friday accepted one bid worth Rs 275 crore under the repo operations. Treasury officials state that the tightness in liquidity is likely to remain until the government resumes spending. Call rates moved up to touch an intra-day high of 6.20%.

The surplus liquidity funds parked by banks with the central bank under the reverse repo operations saw a sharp dip of nearly Rs 15,000 crore in a single day. The RBI mopped up bids worth Rs 10,230 crore under the reverse repo operations in the morning session of liquidity adjustment and Rs 12,665 crore under SLAF.

Bond yields rose for a second consecutive session on concerns that payment of corporate tax by companies could drain surplus cash from the banking system that would otherwise be invested in debt. The second instalment of corporate tax was due to be paid from September 15. Analysts estimate the quarterly taxes will be a total of about Rs 25,000-35,000 crore. The yield on the benchmark 7.59% ’16 bond ended at 7.83%, up from 7.80% at the previous close.