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Our Bureau

Mumbai, Oct. 29 The inter-bank call rates inched upwards on Wednesday, as banks borrowed in the overnight market to meet their funds shortage. Call rates closed substantially higher at 13.5 per cent, as against Monday’s close of 9.50-9.75 per cent.

Last week, call rates were around 6 per cent after the 250 basis point cut in CRR released Rs 1,00,000 crore into the system.

“Tight liquidity conditions in the market could be attributed to the increased borrowing due to holidays and large scale withdrawals from banks for spending on Diwali”, said Mr K. Harihar, Treasury Head, Development Credit Bank.

Since it is the beginning of the fortnight, banks are borrowing to shore up their balance sheets. Besides, the markets are expecting further tightening due to the auction of Rs 10,000 crore worth government securities, said dealers.

The Reserve Bank of India’s intervention in the forex market to stabilise the rupee is also sucking out liquidity in the system.

With the liquidity crunch in the markets, banks borrowed close to Rs 56,000 crore from the RBI under the liquidity adjustment facility on Wednesday.

In the two-day repo auction under the first LAF, the RBI received and accepted 35 bids for Rs 27,125 crore. There were no reverse repo bids.

In the two-day repo auction under the second LAF, the RBI received and accepted 33 bids for Rs 28,970 crore. In the two-day reverse repo auction under second LAF, the RBI received and accepted 2 bids for Rs 10 crore.

In the 14-day special repo auction scheme for mutual funds under the LAF, five bids were received for Rs 2,425 crore. In the CBLO market, there were 453 trades amounting to Rs 24,098.25 crore in the rate range of 7.90-9 per cent.

More Stories on : Short Term Instruments

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