Indian cash rates fall as money supply improves

MUMBAI Oct 14 (Reuters) - Indian overnight cash rates closed lower on Tuesday as a cut in banks' cash reserve ratio last week helped ease money supply in the banking system to some extent.

Call rates INROND= closed at 8.75/9.00 percent, compared to 9.75/10.00 percent at close on Monday.

"We still have a shortage of about 500 to 600 billion rupees in the system. However, most of it is met through the repo, so cash rates have eased slightly, but demand for funds is still strong," a dealer with a state-run bank said.

The central bank last week cut banks' cash reserve ratio, or the proportion of deposits banks have to keep with it, by 150 basis points to 7.5 percent, releasing 600 billion rupees of funds to banks.

The weighted average rate in the call money market was 9.97 percent, while collateralised borrowing and lending obligation (CBLO), a secured form of money market lending, was 9.03 percent, according to the Clearing Corp of India (CCIL).

Volume in the call money market was a high 183.61 billion rupees and in CBLO it was 170.91 billion rupees, CCIL data showed.

The central bank did not receive any bids at either of its daily reverse repo auctions, while it pumped in a total of 628.05 billion rupees into the system through the two repo auctions, indicating a slight easing of cash conditions. (Reporting by Swati Bhat; editing by Sunil Nair)