The call money rate is expected to open firm on Monday, as liquidity may remain tight until the government steps up spending.
Bank borrowings from the money market might only escalate next week, as they race to meet the quarter-ending business targets, dealers said.
All through the week, daily bank borrowing through the Reserve Bank of India’s (RBI’s) repo window was either close to or above Rs 1.5 lakh crore. Moreover, the liquidity crunch remains above the central bank’s comfort level of one per cent of net demand and time liabilities.
The short-term money market rates have ruled much above RBI’s repo rate of 6.25 per cent, the operating ratio for policy. The interbank call money rate for three-day borrowings ended steady at around seven per cent amid strong demand for funds by banks ahead of the weekend, dealers said.
The bank resource mobilisation through certificate of deposit (CDs) has stayed at elevated levels throughout December, which has pushed CD rates within striking distance of 10 per cent (annually).
A senior State Bank of India official said a substantial increase in the government spending was crucial to ease liquidity pressure. It has piled up huge balances with RBI.
The outstanding balances rose by Rs 61,492 crore to Rs 1,00,278 crore at end of December 17.
