The banking system continues to reel under liquidity crunch. Banks borrowed Rs 1,18,440 crore for one day from the Reserve Bank of India to tide over the tight liquidity situation.
Tight liquidity is also underscored by the surge in volumes (to Rs 34,338 crore as compared with Rs 2,480 crore on November 4) under the Clearing Corporation of India's collateralised borrowing and lending obligation mechanism.
Overnight call money rates touched an intra-day high of 7.5 per cent, although they ended lower at 6.50-6.60 per cent. CBLO rates were volatile, ranging from 6.99 per cent to 0.05 per cent.
Besides demand for funds to maintain cash reserve ratio for the new fortnight, bankers attribute the tightness in liquidity to banks' borrowing to meet payments (aggregating Rs 11,000 crore) towards bids for the Government securities auction held on November 4 and the financial system gearing up to meet funding requirements for Power Grid Corporation of India Ltd's Rs 8,000-crore follow-on public offer.
In the four-day repo auction conducted by the RBI on Thursday, banks had borrowed Rs 84,230 crore.
Money market dealers fear that if bank credit gathers momentum then the tight liquidity situation could get aggravated further. They feel that to alleviate the liquidity situation, the central bank should resort to a combination of open market operation purchases and intervention in the foreign exchange market.
The RBI's Liquidity Adjustment Facility window has remained in an injection mode since September 9, with an average daily net injection of around Rs 24,000 crore in September and Rs 61,700 crore in October and a peak injection of Rs 1,31,260 crore on October 29.
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