Indicating a cash squeeze in the banking system, the Reserve Bank of India pumped in Rs 38,730 crore, on Tuesday as against Rs 32,215 crore on Monday, through the overnight repo window.
The injection of funds this week is much higher than last week, where the RBI injected an average of about Rs 5,000-11,000 on a daily basis. The market estimates that around Rs 35,000 crore worth advance tax outflows, are pressuring banks to borrow in the call market to fund their requirements.
On Tuesday, Indian overnight cash rates stayed above 8%, as advance tax outflows and cash settlements for last week?s bond auctions drained liquidity from the system.
It ended at 8.20-8.25%, higher than its previous close of 8.00-8.25%.
The central bank sold Rs 3,000 crore and Rs 6,000 crore worth treasury bills and bonds on Wednesday and Friday, respectively, making the cash situation even tighter.
However, there are expectations of the money to come back into the system as government spending starts.
?Advance tax outflows and bond auctions have drained out a lot of cash from the system. However, cash conditions will ease slightly, once government spending starts in a week or two,? said a dealer.
As per CCIL data, volumes in the call money market stood at Rs 15,283 crore on Tuesday.G-sec volumes in the collateralised borrowing and lending obligation (CBLO) market stood at Rs 28,439 crore as against Rs 47,603 crore last week.
The weighted average rate in the call money market was 8.25%, while (CBLO), a secured form of money market lending was 8.01%.Average CBLO volumes last week decreased by about 14% as compared to the previous week. The weighted average rates stood at 7.87% last week.
Last week, the market share of NDS trades decreased to 48% of the total gsec trading volumes as against 50% during its previous week. The share of g-sec trading on the NDS-OM platform increased to 52% of the total g-sec trading volumes as against 50% during the previous week.
The market share of NDS trades decreased to 76% of the total T-bill trading volumes during last week, as against 90% during the pervious week.
On Tuesday, the 10-year benchmark bond yield ended at 8.57%, off an intraday low of 8.54%, down from Monday?s close of 8.64% as RBI Governor, Yaga Venugopal Reddy signalled on Monday the bank would tighten policy to fight inflation.
