Surplus cash in system keeps Indian o/n rates steady

MUMBAI, Nov 11 (Reuters) - Indian overnight cash rates were barely moved on Wednesday as surplus liquidity in the banking system helped banks borrow for their funding needs at ease.

At 12:53 p.m., the one-day money at the inter-bank market was at 3.25/30 percent, little changed from its previous close of 3.20/30.

"Cash is easily available and trend of money in inter-bank as well as CBLO markets is steady and volumes normal," said Nikhil Jain, dealer at Bank of Rajasthan.

At CBLO, the collateralised form of money market, overnight cash usually trade below the inter-bank rates, as cash-rich mutual funds are also lenders there.

Overnight money at the inter-bank finds a floor around 3.25 percent as the central bank absorbs surplus funds from banks at that rate at its daily liquidity adjustment auctions.

Traders said volumes may increase in the coming fortnights as at least some banks are seeing a rise in demand for credit.

Banks have to report their liabilities to the central bank once in two weeks and park 5 percent of their deposits with it as cash.

Shyamala Gopinath, a deputy governor of the RBI said on Tuesday that the bank will keep adequate liquidity in the system, adding that credit growth cannot be looked only from bank credit angle. [ID:nBMA006389]

Cash surplus in the banking system has been hovering around 1 trillion rupees since late April amid steadily declining bank-loan growth.

Central bank data last week showed Indian bank loans INLOAN=ECI rose only 9.7 percent on year as of Oct. 23, down from 10.8 percent two weeks ago.

Banks parked 1.02 trillion rupees with the central bank at its reverse repo auction on Wednesday. (Reporting by Boby Michael; Editing by Prem Udayabhanu)