Call Money Rates Surge Amid Fiscal Year-End Funding Frenzy

Call money rates hit 7% as banks increased borrowing to meet fiscal year-end liquidity needs. Despite comfortable liquidity, pressure arose due to regulatory requirements and market holiday. Rates opened at 6.85%, reaching 7%, while Tri-party repo rates peaked at 6.99%. The central bank injected Rs 50,001 crore to stabilize conditions.

As the fiscal year comes to a close, banks find themselves in a liquidity crunch, pushing call money rates to 7% on Monday. This spike results from banks stepping up borrowing to satisfy the high liquidity needs driven by regulatory demands and balance sheet adjustments.

According to the Clearing Corporation of India, the call money market – where overnight funds are borrowed and lent – saw rates open at 6.85% before surging to 7%. Similarly, Tri-party repo rates increased from an opening of 5.60% to a peak of 6.99%.

Despite the banking system's estimated surplus liquidity of Rs 1.14 lakh crore, market participants are feeling the pressure. To stabilize the market, the central bank initiated a three-day variable rate repo auction, injecting Rs 50,001 crore of liquidity.

(With inputs from agencies.)