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India overnight rates touch 5-month high

India overnight rates touch 5-month high
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First Published: Fri, Aug 17 2007. 04 06 PM IST
Updated: Fri, Aug 17 2007. 04 06 PM IST
Reuters
Mumbai: Indian overnight cash rates rose to their highest in nearly five months on Friday, 17 August, after some banks resorted to sudden borrowing to cover last minute reserve requirements with the central bank.
At 3:45pm (1015 GMT), the overnight rates were at 35-40%, off a peak of 50% — its highest since late March. Overnight rates ended at 5.8-6% on Thursday.
Banks are required to report their cash balances with the central bank on alternate Fridays.
Earlier this month, a 50-basis-point increase in the cash reserve ratio — percentage of deposits banks need to keep with the central bank in reserve — came into effect.
“There was surplus cash in the banking system through this week. However, after lending to the central bank in the repo auction, the market faced a shortage of funds,” a foreign bank trader said.
Money and bond markets are closed on Monday for a local holiday.
On Friday, the Reserve Bank of India absorbed Rs306.50 billion via its daily reverse repurchase auction.
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First Published: Fri, Aug 17 2007. 04 06 PM IST