Indian cash rates rise ahead of tax outflows

MUMBAI Dec 11 (Reuters) - Indian overnight call rates rose on Thursday as demand for funds picked up in the first week of the reporting cycle and ahead of advance tax payments due next week, but dealers said the rise is temporary as cash is adequate.

At 11:15 a.m., overnight cash rate INROND= was at 5.25/5.30 percent, off an early high of 5.50 percent, but up from Wednesday's close of 5.00/5.10 percent.

"Some banks who are short of funds are now covering, pushing up the rates but, it will be temperory, because cash is fine," said a dealer with a private bank.

Banks have to report their cash balances to the Reserve Bank of India every two weeks and they try to fund most of their needs in the first week itself, which pushes up call rates. The new reporting period began on Saturday.

Advance tax outflows due next week is another reason for funds shortage at some banks, dealers said.

Call rates will ease towards the later part of the day, but will stay below 6 percent in the fortnight, a dealer with South Indian Bank said. (Reporting by Boby Michael and Swati Bhat; Editing by Ramya Venugopal) ((boby.michael@thomsonreuters.com; Tel: +91-22-6636 7377; Reuters Messaging: boby.michael.reuters.com@reuters.net))