The interbank call rate shot up to a high of 60 per cent intra-day following a technical delay in payment clearances in the real time gross settlement (RTGS) system of the Reserve Bank of India. | |
| According to dealers, banks panicked as they felt they might default on CRR payments when the fund flow stopped due to a technical snag in the RTGS for almost an hour. All transactions in the money and government securities market are settled under RTGS. |
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| Call money is the rate at which banks lend and borrow from each other for daily funds management. |
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| However, the rates calmed down to close around 7/7.5 per cent after RBI conducted a special liquidity adjustment facility to infuse funds into the system at 7.75 per cent under repo. |
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| IDBI Gilts managing director N S Venkatesh said, "The Real Time Gross Settlement (RTGS) had slowed down in the morning, forcing some large banks, which are generally lenders, to approach the market for borrowing." |
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| While RBI infuses liquidity into the system through purchase of securities (repos), it absorbs the excess funds from the system by sale of government securities (reverse repo). These transactions are reversed after the maturity of deal which usually extends from one day to three days. |
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| Banks pay a portion of deposits mobilised in a fortnight to RBI as a statutory requirement on reporting Fridays which is known as the CRR. If a bank defaults on its CRR payments, it has to pay CRR with a penal rate of interest. |
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