Call money volumes remain subdued despite extending trading timings

Call Money market

Even though the Reserve Bank of India (RBI) has extended the timing of the call money market, the volumes still remain subdued as the rates on this instrument is higher compared to Tri-part repo (TREPs), money market experts said.

According to the Reserve Bank of India (RBI) data, the volumes after extending the market trading timing of call money remained in the range of Rs 15,000 crore to Rs 17,000 crore between July 1 and July 3.

This was more or less in line with volumes before that where it ranged between Rs 15,000 crore to Rs 18,000 crore, as per RBI’s data.

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.

"The volumes have remained subdued as, still in the overnight segment, it is a game of rates. The weighted average rate of call money is still higher than triparty repo," said Dipanwita Mazumdar, Economist at Bank of Baroda.

On June 25, the RBI announced extension of market trading timings of call money and repo and TREPs. The effective date of extension was on July 1.

The market timings for call money shall be extended to 7:00 PM. Accordingly, the revised market hours shall be from 9:00 AM to 7:00 PM, RBI said.

On May 22, Moneycontrol had reported that 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.

Experts are of the view that the increase in the volumes can be witnessed in the second half of this fiscal year due to expected pick in credit demand and expected tightness in system liquidity.