The two-sided character of India’s liquidity squeeze sharpened on Thursday. Banks placed 161,742 crore rupees in the standing deposit facility at 5.25 percent, up from 125,597 crore the previous day, while marginal standing facility drawings rose to 3,746 crore at 5.75 percent from 2,613 crore. The system is simultaneously long and short: surplus banks are parking more at the floor while deficit banks borrow more at the ceiling.
Trading volumes confirm the churn. The overnight segment traded 714,822.46 crore at a weighted average rate of 5.66 percent, in a range of 4.51 to 6.00 percent. Triparty repo accounted for 522,241.70 crore at 5.65 percent, market repo 174,353.65 crore at 5.67 percent and call money 12,966.21 crore at 5.69 percent. A 149 basis point range inside one overnight market is itself a stress marker, because it prices the same night very differently depending on the borrower’s collateral and name.
The aggregate position has not changed. Cash balances with the Reserve Bank were 845,922.05 crore against an average daily requirement of 833,309 crore for the fortnight ending October 31, and net durable liquidity remained in surplus at 1,014,401 crore as on September 30. Net liquidity from outstanding operations including Thursday’s was in absorption by 31,254.95 crore. The constraint is where the money sits, and Friday’s three-day repo, bid at more than twice the amount on offer, is the price of moving it.