Volumes in the call money market are unlikely to get a boost despite the proposed extension of market timing. Experts attribute this to higher volumes in the initial hours of the market and fading down towards mid and end of market hours.
A treasury with a state-owned bank said that volumes are seen higher between 9 AM and 12 PM, which is mostly by the large banks, whereas after that, small banks or cooperative banks make a trade of a small amount.
This is evident in today’s trading session as well when out of 256 deals which have taken place till 1 PM worth Rs 16,637.19 crore in the call money market, of which 70 trades worth Rs 10.360 crore were taken place in the initial one hour, according to the Clearing Corporation of India’s (CCIL) data.
Each trade that took place in the initial hours was in the range Rs 50 crore and Rs 500 crore at a deal rate of 5.80-5.90 percent, data showed.
Usually, after 1-2 PM, the call money market sees major trades having an amount of Rs 5-50 crore per deal, an expert said.
Another treasury head with a small finance bank also raised similar concerns over the extension of the timing. However, he added that it is only needed if any banks want emergency funds after the market hours at lower rates and without collateral.
Call money rate is the rate at which banks typically borrow and lend short-term funds to each other. The rates on this instrument is determined by various reasons such as demand for funds, banking system liquidity, quarter or month-end demand, among others.
On May 2, the Reserve Bank of India (RBI) recommended extending trading timings for the call money market to 7 PM from the current timing of 5 PM. This, to meet the needs of the banks in a real-time payment system.
The working group was chaired by Radha Shyam Ratho, Executive Director, RBI. The central bank has set up the working group, which was announced in the February monetary policy.
The report said that standalone primary dealers (SPDs) have given suggestions or feedback to extend the call money market timings and the reporting window, including for cancelled transactions, may be permitted till 7:30 PM.
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