In spite of banks parking nearly Rs 40,000 crore surplus cash with the Reserve Bank of India (RBI), at least one player today borrowed funds in the overnight call market at 75 per cent.
According to data available on the negotiated data system (NDS) platform, at 4.18 pm, a bank or bond house accessed the call money market to raise Rs 3.3 crore at the high rate.
While the Clearing Corporation of India (CCIL) website initially showed that 75 per cent was the highest rate during the day, when contacted by Business Standard, it changed the numbers. The revised data put the highest call rate at 8.5 per cent. “We have made a change since it is an outlier,” said a CCIL official.
Bankers said they were surprised by the data since there was ample liquidity in the system, evident from the activity at the reverse repo window, used to park surplus liquidity with RBI. This deal was not indicative of market condition.
The two-day inter-bank money closed at 8 per cent, its highest since late October 2008. The close was sharply up from its previous close of 3.5/6 per cent.
The volume in the call rate segment declined to Rs 11,295 crore from Rs 14,675 crore yesterday. The collaterialised borrowing and lending segment (CBLO) also showed drop in volume to Rs 69,567 crore as against Rs 83,299 crore yesterday, according to CCIL data.
Overall, however, there was upward pressure on overnight cash rates. The rise was prominent after RBI conducted the liquidity adjustment facility (LAF) operations in the morning. “Perhaps, some bank miscalculated their fund requirement and, therefore, had to resort to borrowings at higher rates in the afternoon,” said the head of treasury at a private sector bank.
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Another executive said banks cover their positions for reporting Friday one week in advance. But, this being the last fortnight of the financial year, banks are rushing to meet business targets, which is partly pushing call rates.
Some banks faced unexpected cash shortages ahead of a holiday, with needs specific to the financial year-end also weighed in. The call money is expected to fall back to the reverse repo floor on Thursday.
Traders said some banks, which invested in short-term assets like commercial papers ahead of the financial year-end, probably scrambled to cover positions by borrowing from market, leading to sudden shortfall of cash.
The rising in call rate is also in sync with RBI’s action to raise its benchmark borrowing and lending rates by 25 basis points each to rein inflationary expectations. The repo rate is now at 5 per cent and the reverse repo at 3.5 per cent.