Indian call rates end down but cash conditions tight

(Adds clearing house data, updates to closing level)

MUMBAI, May 30 (Reuters) - Indian overnight call rates ended lower on Friday, but the cash squeeze in the banking system continued after the increase in banks' cash reserve ratio kicked in over the weekend and on outflows towards bond auctions.

Call rates INROND= ended at 7.00/7.25 percent, lower than its previous close of 7.80/8.00 percent.

"Cash in the system is still tight, there may be a pick up in government spending next week, but then there are bond auctions as well. So call may stay at these levels," a dealer with a state-run bank said.

At its policy review on April 29 the central bank increased banks' cash reserve ratio (CRR), the amount of deposits banks have to keep with it, by 25 basis points to 8.25 percent with effect from May 24.

The Reserve Bank of India sold 100 billion rupees worth bonds on Friday, the cash settlements for which took place on Monday. It is scheduled to sell another 100 billion rupees worth bonds between May 30 to June 6.

The weighted average rate in the call money market was 7.97 percent, while collateralised borrowing and lending obligation (CBLO), a secured form of money market lending, was 7.58 percent, according to the Clearing Corp of India (CCIL).

Volume in the call money market was 113.92 billion rupees and in CBLO it was 516.16 billion rupees, CCIL data showed.

"Most of the deals happened early in the day, there were hardly any deals at levels below 7.75 percent," a dealer with a private bank said.

The central bank absorbed a marginal 0.30 billion rupees through its daily reverse repo auction on Friday, while it pumped in 96.30 billion through the repo auction, indicating a severe cash sqeeze in the banking system. (Reporting by Swati Bhat; Editing by Sunil Nair)