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India's overnight collateralised interbank rate shot up to its highest in nearly three months as banks preferred to lend less ahead of a market holiday on Wednesday in Mumbai, to be prepared for any sudden outflow from other centres in the country.
The collateralised borrowing and lending obligation rate rose to 9.25 per cent, its highest since July 24, and compared with 7.80 per cent on Monday.
"Fearing outflows on working day from other centres due to a holiday in Mumbai, some banks are keeping more surplus instead of lending," said a senior dealer.
Markets are closed in Mumbai due to elections in the state of Maharashtra on Wednesday.
The overnight call rate surged to 8.75 per cent in a few trades, though overall the rate hovered around 8 per cent as most banks usually cover positions in the call market in the first half of the day itself, traders said.
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