Indian call rates end higher as cash remains tight

(Updates to close)

MUMBAI, June 24 (Reuters) - Indian overnight cash rates stayed above 8 percent on Tuesday, as advance tax outflows and cash settlements for last week's bond auctions drained liquidity from the system.

Call rates INROND= ended at 8.20/8.25 percent, higher than its previous close of 8.00/8.25 percent.

"The system has been short on liquidity after the advance tax outflows and bond auctions last week which drained cash," a dealer with a state-run bank said.

"Once the money starts to come back into the system through government spending in a week or two, will we see cash conditions ease slightly, but till then call rates will stay high," he added.

Market estimates suggest a total 350 billion rupees worth of advance tax outflows, pressuring banks to borrow in the call market to fund their requirements.

Dealers also said the central bank has been seen selling dollars in the currency market in recent weeks to arrest the rupee's decline, and this has led to it further absorbing rupee liquidity from the system.

The weighted average rate in the call money market was 8.25 percent, while collateralised borrowing and lending obligation (CBLO), a secured form of money market lending was 8.01 percent, according to the Clearing Corp of India (CCIL).

Volume in the call money market was 152.83 billion rupees and in CBLO it was 284.39 billion rupees, CCIL data showed.

The central bank did not receive any bids at its daily reverse repo auction on Tuesday, while it pumped in 387.30 billion rupees through the repo auction, indicating the extent of cash squeeze in the system. (Reporting by Swati Bhat; Editing by Ramya Venugopal)