Raised CRR pushes up call rate to double digit
Wednesday, 19 May 2010
FE Report
Call money rate rose to double digit Tuesday mainly due to increased demand for fresh funds in the inter-bank money market, treasury officials said.
"The demand for fresh funds was slightly higher on the day following raising of the cash reserve requirement (CRR) by the central bank to curb inflationary pressure on the economy," a senior treasury official of a commercial bank told the FE.
The call rate ranged between 6.00 per cent and 10.00 per cent on the day against 5.50 - 9.95 per cent of the previous day. However, most of the deals were settled between 7.00 per cent and 9.00 per cent.
Under the new rules, the commercial banks will have to maintain a CRR of 5.5 per cent instead of the previous 5.0 per cent with the central bank from their total demand and time liabilities on a bi-weekly basis.
"The central bank should intervene in the market directly using its instruments like repurchase agreement (repo) to bring down the call rate at a rational level," another treasury official of a leading private commercial bank said.
He also said a section of banks are now taking the opportunity of non-availability of repo from the central bank.
Call money rate rose to double digit Tuesday mainly due to increased demand for fresh funds in the inter-bank money market, treasury officials said.
"The demand for fresh funds was slightly higher on the day following raising of the cash reserve requirement (CRR) by the central bank to curb inflationary pressure on the economy," a senior treasury official of a commercial bank told the FE.
The call rate ranged between 6.00 per cent and 10.00 per cent on the day against 5.50 - 9.95 per cent of the previous day. However, most of the deals were settled between 7.00 per cent and 9.00 per cent.
Under the new rules, the commercial banks will have to maintain a CRR of 5.5 per cent instead of the previous 5.0 per cent with the central bank from their total demand and time liabilities on a bi-weekly basis.
"The central bank should intervene in the market directly using its instruments like repurchase agreement (repo) to bring down the call rate at a rational level," another treasury official of a leading private commercial bank said.
He also said a section of banks are now taking the opportunity of non-availability of repo from the central bank.