Banks prefer cheaper Treps to call mkt

RESERVE BANK OF India (RBI) governor Sanjay Malhotra last week urged banks to use the inter-bank call money market instead of passively parking funds with the standard deposit facility (SDF) – a call also made by his predecessor Shaktikanta Das.

- ANUPREKSHA JAIN

However, banks are reluctant to do the same mainly due to their reliance on the tri-party repo (Treps) and Chroms (clearcorp repo order matching system) market for funding needs, as they can borrow at cheaper rates than the call money market. In addition, traders say that there is a lack of information in terms of funding requirements of banks, which is a deterrent.

This has led banks to keep more in the standing deposit facility with the RBI as it provides them room to park funds till 12 am, giving sufficient cover for any unforeseen funding needs.

"We urge the banks to actively trade among themselves in the uncollateralised call money market to make it deeper and vibrant for better signal extraction from the weighted average call money rate (WACR),"" Malhotra said in his maiden monetary policy statement.