India repo borrowings remain high; arbitrage gains

Indian banks' repo borrowings continue to remain high, reflecting higher government balances with the central bank, widening gap between credit and deposit growth.

Government's balances with the Reserve Bank of India rise to Rs 306.19 billion in the week ended Jan. 11 versus Rs 197.26 billion in the earlier week. Repo borrowings surge to their highest in seven sessions at Rs 955.25 billion.

Overnight cash rates steady at 8.05/8.10 per cent.

Banks use excess bond holdings to borrow in repo at 8 per cent and lend in call and even commercial paper for arbitrage gains. The yield on the benchmark 3-month CP stood at 8.7375 per cent.

Total volume on the central bank's electronic trading platform stands at Rs 129.82 billion at a weighted average rate of 8.09 per cent while that in the CBLO market stands at Rs 470.87 billion at a weighted average rate of 7.97 per cent.