Last Updated : Jan 28 2013 | 11:58 PM IST
Thereafter in cases of extreme crisis or need for funds, the route for demand loans is sought, which is usually at a higher rate compared to the repo rate of 7.75 per cent .
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Call rate is the interest rate for lending and borrowing of funds by the banks for daily fund requirements.
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Sources close to the developments said that the borrowings made by 15-odd banks through the demand loan route has witnessed an increase of Rs 4128 crore week over week. Usually the balance remains flat at around Rs 100-150 crore, said sources.
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Since the week coincides with the opening of the initial public offer of Reliance Power with an issue size of around Rs 12,000 crore , it is believed that most of the banks have borrowed in excess for on-lending to retail as well as institutional investors to participate in the IPO.
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The borrowing from RBI as demand loans is done under section 17 of the RBI act.
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The IPO has resulted in a temporary and artificial shortage of funds in the market which is keeping the call rates rather high at 7.5/8 per cent. Dealers said that the call rates will ease from Thursday onwards when the refunds start coming.
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Moreover, the call rates had gone up to a high of 60 per cent last week when real time gross settlement got flooded with settlement orders and the system stopped settlements for an hour.
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According to market sources, the settlement needs to be done for each market
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First Published: Jan 24 2008 | 12:00 AM IST