Call money ends 10-year high at 60-70 pc

Mumbai, Mar 21 (UNI) Interbank call money today ended 10-year high at 60.00-70.00 per cent against 23/25 per cent on the previous day's close, brokers said.

India's overnight cash rates rose to their highest in more than 10 years today on a cash squeeze in the banking system caused by tax payments and worries of a state-run bank strike next week.

The overnight cash rate, the rate at which banks lend funds to each other, ended at 60-70 per cent, compared to its previous day's close of 23.00-25.00 per cent. This was the highest since 1996, when the rate topped 100 per cent.

Bonds weren't traded on the central bank's electronic trading platform, which traders said reflected the cash squeeze, and market sentiment was extremely nervous as banks sought to secure funds to meet their daily requirements.

The yield on the 10-year federal bond ended at 8.07 per cent on Tuesday.

Cash in the banking system shrunk sharply in recent days after quarterly tax payments of an estimated Rs 30,000 crore, and the resumption of bond sales under the market stabilisation scheme (MSS) by the central bank after a gap of 18 months.

The central bank pumped Rs 35,300 crore into the banking system yesterday through its daily repurchase auctions. It was the biggest injection of funds since late December, indicating the extent of cash shortfall.

The Reserve Bank of India is scheduled to sell Rs 2,000 crore of MSS bonds tomorrow, after issuing Rs 8,000 crore of the bonds over the previous two weeks.

Media reports that staff of state-run banks would strike next week also spooked sentiment as they are typically the biggest lenders in the unsecured overnight money markets, dealers added.

UNI