The interest rate in the overnight inter-bank market may see pressure to move up, due to demand for funds in the first week of the new reporting fortnight.
Dealers said though the quarter-end (December 2010) demand from banks was over, the need for funds to finance credit remained high. This was also going to push money market rates up.
Call rates on most deals ruled closer to the seven per cent mark on Friday. The weighted average call rate was 6.82 per cent, according to the Clearing Corporation of India data.
Liquidity in the system remains tight. Most banks would cover their reserve needs in the first week of the reporting fortnight.
Banks’ borrowing at the Reserve Bank of India’s liquidity adjustment facility has remained over Rs 1,00,000 crore for the past few weeks.
On Friday, borrowing was slightly low. They borrowed Rs 99,975 crore from RBI and deposited Rs 1,355 crore at the reverse repo window. Net liquidity injected by RBI was Rs 98,620 crore, compared to Rs 127,855 crore on Thursday.
The overall liquidity in the system has remained in deficit, consistent with the policy stance. But, the extent of tightness has been beyond the comfort level, said RBI in its mid-quarter review.
As a step to ease the strain, the central bank has planned to buy back government bonds of Rs 48,000 crore over four weeks. It purchased securities for Rs 11,502 crore in an auction on December 29.
