Banks raised Rs 16,500 crore through short-term instruments this week to meet quarter-end targets.
The rates on certificates of deposit (CDs) have gone up over the last few weeks. The rate on a three-month CD has hardened by 50 basis points (bps) to 9.20 per cent. One-year deposit rates have gone up to 9.65 per cent from 8.98 per cent at the start of the month.
According to Reuters data, banks today raised over Rs 3,000 crore through CDs, most of it through the three-month instrument.
According to money market dealers, the rates on four month and one-year deposits are likely to touch 10 per cent next week as banks will continue to scramble for cash due to tight liquidity. “Banks are raising funds to meet quarter-end targets. The rates for one-year and four-month deposits are likely to touch 10 per cent by December 31,” said a treasury head of a public sector bank.
To tide over the liquidity crunch, the Reserve Bank of India (RBI) has announced a buyback of government bonds through open market operations and a cut in banks’ statutory liquidity ratio by 100 bps to 24 per cent. Despite these measures, the daily liquidity deficit has been over Rs 1.5 lakh crore on an average this week.
Treasury officials expect more measures by RBI, such as increasing the export refinance cap. At present, banks get 15 per cent of their outstanding export credit refinanced from RBI at the repo rate, which is 6.25 per cent.