Repo borrowing up before policy review

Banks borrowed heavily from the Reserve Bank of India (RBI), anticipating a rate rise, a day ahead of the half-yearly monetary and credit policy review. Repo borrowings from RBI's liquidity adjustment facility stood at Rs 98,285 crore on Monday.

Currently, the repo rate, or the rate at which banks borrow from RBI, is 8.25 per cent. This is expected to rise in case the central bank to continue monetary tightening tomorrow.

“It is the start of a new reporting fortnight and banks borrow to cover reserve needs at the current repo rate,” said a treasury official of a public sector bank. Typically, banks tend to meet fortnightly targets in the first week.

The high demand for funds was also reflected in the interbank call money rate, which rose to 8.4 per cent on Monday.

Bankers expect RBI to raise the repo rate by 25 basis points to 8.5 per cent in the half-yearly policy review. The central bank has increased rates a dozen times in the last 19 months to clamp down inflation and inflationary expectations.