Call rates in the interbank overnight borrowing market hardened, reflecting the pressure on liquidity, as advance tax funds went out of the system.
The Reserve Bank of India (RBI) had, late in the evening, said it would purchase government bonds worth Rs 10,000 crore through an auction on December 22. RBI is conducting open market operations (OMOs) to infuse resources in the system and ensure government borrowings sail through.
According to Clearing Corporation of India data, call rates touched a peak of 8.65 per cent during the day, before softening to close at 9.40 per cent. The average rate for the day was 9.56 per cent, against 9.19 per cent yesterday.
Earlier in the day, RBI deputy governor Subir Gokarn said the immediate pressure on liquidity was from advance tax collections, which stood at about Rs 69,000 crore. Since that amount would be spent over a period of time, the current pressure is clearly for the short term. However, the quantity is reflective of a mismatch, and RBI does not expect this to remain. Things would normalise over the next few days, Gokarn said.
RBI has maintained OMOs would be instruments of choice to ensure adequate liquidity in the system. The strain on resources has been evident from the huge borrowings under the central bank’s liquidity adjustment facility. Banks borrowed about Rs 165,000 crore yesterday under the window, and the demand for funds remained the same on Tuesday, according to RBI data.