Call money closes higher at 13-15 per cent

Mumbai, Dec 23 (UNI) Interbank call money closed at 13.00-15.00 per cent on the last day trading of 2006 today, with a previous closing of 12.25-12.75 per cent, dealers said.

It touched an intra-day high of 20.50 per cent, before it resumed firm at 14 per cent as banks rushed to cover their cash needs.

A severe cash crunch in India's banking system caused by central bank measures to combat double-digit credit growth may ease in the coming days, but the market is not betting on a return to big cash surpluses just yet.

Cash in the banking system has shrunk significantly this month as banks scrambled to prepare for the increase in the cash reserve ratio (CRR), expected to soak up Rs 135 billion (USD 3 billion) and as an estimated Rs 300 billion got sucked out for tax payments.

But the pressure should ease somewhat in coming days, even as the second hike in the CRR is enforced.

Daily bids at the central bank's re-purchase window have increased. The central bank injected an average Rs 125.15 billion a day last week, up from Rs 41.21 billion the week before.

Part of the market tightness has been caused because banks are operating close to the minimum requirements for government bond holdings relative to deposits, leaving them with few bonds to cash in for other purposes.

The trading in call money market will remain officially closed on January one, 2007 for Bakri Id, traders said.

UNI AR OBB AG1902