 "Rates will correct but liquidity issue remains")
In addition to the surge in call money rates, data from the Clearing Corporation of India showed the collateralised borrowing and lending obligations touched a high of 16 per cent today.
"It is the financial year-end, due to which most banks have capital adequacy requirements, due to which they are not willing to lend to each other. The other factor is that mutual fund houses are facing redemption pressure and this is spilling over to the inter-bank money market," said the head of treasury of a private bank.
The present liquidity crunch, agree experts, is driven by lack of government spending and also demand for funds by banks to meet their year-end targets. "From Wednesday, the call rate will be back to near 7.5 per cent," said J Moses Harding, head of IndusInd Bank's asset-liability committee.
According to some reports, the government is expected to close the year with a Rs 75,000-crore cash balance with RBI. The central bank has acknowledged that the wedge between credit and deposit growth has become a structural issue, causing the liquidity tightness. According to RBI data, till March 8, year-on-year growth of bank credit was 15.4 per cent, while deposits grew 13.1 per cent.
"It is the financial year-end, due to which most banks have capital adequacy requirements, due to which they are not willing to lend to each other. The other factor is that mutual fund houses are facing redemption pressure and this is spilling over to the inter-bank money market," said the head of treasury of a private bank.
The present liquidity crunch, agree experts, is driven by lack of government spending and also demand for funds by banks to meet their year-end targets. "From Wednesday, the call rate will be back to near 7.5 per cent," said J Moses Harding, head of IndusInd Bank's asset-liability committee.
According to some reports, the government is expected to close the year with a Rs 75,000-crore cash balance with RBI. The central bank has acknowledged that the wedge between credit and deposit growth has become a structural issue, causing the liquidity tightness. According to RBI data, till March 8, year-on-year growth of bank credit was 15.4 per cent, while deposits grew 13.1 per cent.