MUMBAI, February 13: The Reserve Bank of India (RBI) on Friday mopped up Rs 6,124 crore through the three-day fixed rate repos, signalling return of stability in the money market. This is the highest amount accepted by the apex bank after the July 17, 1997 three-day repo auction where Rs 6,365 crore was accepted by the apex bank at a cut-off rate of 3.6 per cent."The mop-up shows that stability has returned to the money and debt markets and banks are willing to take positions," a money market analyst at a leading brokerage said. According to analysts, a few foreign banks and large public sector banks are parking their short-term surplus funds in the repos.
The apex bank received 34 bids for an amount of Rs 6,124 crore. It accepted all the bids for the same amount. The repo had a fixed rate of 9 per cent. "The number of applicants show that the bidders are spread out," a banker said. Traditionally, large public sector banks like the State Bank of India and Punjab National Bank have been the bidders. But anumber of foreign and private sector banks also bid in the repo, money market sources said.
Bankers attributed the large mop-up to the fact that Rs 1,876 crore came into the banking system on February 12 on account of a repo maturity. On the same day Rs 104 crore went out of the system on account a four-day repo.This effectively means that Rs 1,772 core came into the system on that day.Another repo worth Rs 3,224 crore matured today. "The system was flush with Rs 4,996 crore of surplus money which needed to be parked," a senior banker pointed out.
"A lot of foreign banks are selling their dollar holdings and buying rupees to maintain their cash reserve ratio requirements," a head of treasury in a US-based bank said. This apart, after the deposit rates have been hiked by banks in response to the January 16 tight money measures, deposits in the banking system have been on the rise.
"With no corresponding credit offtake, banks are parking repos as the securities market is still dormant," the debt analystin a broking firm said.
Treasury heads are unanimous that the mopping up of such a large amount through repos will not have much effect on the overnight call rates. Forward rates have come down with one-month premia closing at 7.5 per cent (annualised) and six-month forwards closing at 13.60 per cent. A week back, one-month annualised premia hovered around 22 per cent and six-month waspegged at 17 per cent.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
