Reflecting increase in year-end demand, liquidity in the system may remain tight next week. Banks have increased their borrowings at the Reserve Bank of India’s liquidity facility to manage the expected mismatch.

A senior treasury executive with an associate bank of State Bank of India said: “We do not see much change next week. Borrowings at the liquidity adjustment facility (LAF) window are expected to remain above Rs 1,00,000 crore.”

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Despite increase in borrowings and a strain on resources, overnight interbank rates have remained stable at around seven per cent. On Friday, call rates at the close were 6.75 per cent. The volume in the call segment of the overnight market was Rs 14,686 crore as against Rs 14,225 crore on Thursday, according to data with CCI.

“Banks have raised funds through certificates of deposit (CDs) than using the call money market. One-year CDs are preferred to call money and three-six month instruments to provide some stability to the resource profile, even if at higher rates,” said another public sector bank executive.

Borrowings remain above the RBI’s comfort level of one per cent of net time and demand liabilities. Going forward, the pressure on resources may ease marginally on two counts. One, the government borrowing programme is almost complete. Two, the intense deposit mobilisation at attractive rates through retail branches has begun to show effects. More money is coming to banks, said an analyst with a public sector broking house.

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