Call money market sees Rs 3,000 crore surge in volumes as extended trading hours begin

Synopsis

The call money market witnessed a surge in volumes by ₹3,000 crore, reaching ₹16,015 crore, following the extension of trading hours until 7 pm. Public sector banks and primary dealers actively participated, contributing to the increased activity. This extension aims to boost overnight money market trading and discourage parking funds in the standing deposit facility.

Mumbai: Volumes in the call money market increased by ₹3,000 crore on the first day of the extended business hours on Tuesday. Trade volumes were at ₹16,015 crore on Tuesday, up from ₹13,225 crore on Monday, CCIL data showed.

On July 1, the call money market stayed open for trading up to 7 pm for the first time with major participation by public sector banks and primary dealers (PDs). The weighted average call rate (WACR) was at 5.31% on Tuesday. The WACR stood at 5.50% on Monday due to quarter end demand, a money market trader with a private sector bank said.

The rationale to extend timing by two hours was to attract trading in the overnight money market and discourage market participants from parking surplus funds in the standing deposit facility (SDF) which remained open till 11.59 pm.

Under SDF, banks can park funds with RBI at 5.25% thus giving them a window to park the surplus post 5.00 pm. Currently, the SDF window operates from 7 pm to 11.59 pm.

"Participation by PDs has gone up in the call market after the RBI stopped doing variable rate repo (VRR) operations, where PDs were active participants. Major lenders were public sector banks," a money market trader said.

The extension of the market hours is in sync with the increasing size of different domestic markets and increase in the number of participants.

The central bank took the decision after examining the recommendations by a working group set up in February, which reviewed the trading and settlement timings of financial markets.

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