MUMBAI, Dec 18: Even as the inter-bank call money rates shot up to 50 per cent, the rupee gained ground against the dollar at the inter-bank foreign exchange market following the latest RBI moves to boost dollar inflows.

However, prices of government securities (gilt) fell in the securities market and the booming CP market came to a halt in related developments.The rupee ended at Rs 39.24/28 per dollar, off its intra-day high of Rs 39.11/14 but stronger than the previous close of Rs 39.38/40. The RBI had on Wednesday asked banks to charge a minimum of 20 per cent per annum on overdue export bills and also slapped a 15 per cent surcharge on interest on bank credit for imports.

Dealers said the moves aimed at speeding up remittances of foreign currency earnings by exporters and at discouraging inessential imports sparked dollar sales by banks and corporates in early trade Thursday. ``These moves boosted sentiment on the rupee and there was a bit of a dollar sell-off in the morning," said a dealer.

In the government securities market, prices of gilts across the board came down by 50 paise to Re 1. This development is exactly opposite to what the apex bank wants, as the RBI's objective is to jack up the short-term interest rates to prevent the spill-over of excess liquidity to the forex market. The Reserve bank governor Jalan said interest rates at the medium and long end will not go up.

Dealers said the 12.5 per cent gilt maturing in 2004 reacted in a big way with the price falling to Rs 105 on Thursday from Rs 106 on Wednesday. Among other securities which reacted were the 12.59 per cent gilt maturing in 2004 where the prices fell to 106.10 from Rs 106.25 on Wednesday, the 11.83 per cent gilt maturing in 2003 where it fell to 102.30 from 102.70 Meanwhile, the booming CP market has come to a halt following the sharp rise in call rates. The borrowers and lenders are waiting for call rates to stabilise before taking fresh commitments in CPs. In fact the CP market went into a hybernation from the start of the week after the call rates hardened from about 7-8 per cent last week to 9.5-10.5 per cent this week.

The corporates which had been raising money from banks through CP issue at 9-10 per cent last week are now being offered quotes in the range of 13-14 per cent. Though, call rates came down to close at 10-12 per cent on Thursday, it is still considered too high for banks to offer attractive rates for corporate CPs.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.