Call hits 12% on cash crunch

Call rates hardened today to touch a high of 12.5 per cent as liquidity in the money market came under strain due to outflows towards payment for advance tax and debt auction. Call rates closed at 10.50-10.60 per cent, off a high of 12.50 per cent, the highest since April 17, 2006. It had ended at 9.80-10 per cent on Saturday.

Advance tax payments by companies for the second quarter are estimated to be over Rs 35,000 crore. The amount will move out of the system in the next 2-3 days, causing a strain on liquidity, a treasury head of Andhra Bank said.

Besides tax payments, outflows on account of the auction settlement held last week is also impacting the availability of funds.

The government sold bonds worth Rs 17,000 crore last week. Banks in need of funds tapped RBI’s repo window. The central bank pumped in Rs 51,815 crore into the system through the repo route, the highest amount since July 21 this year, indicating the extent of cash crunch in the system.

Banks are short of excess bonds, which they use to borrow through RBI’s repo auctions, forcing them to resort to the call money market to meet funding obligations, said a money market dealer of a private bank.