Banking system liquidity in surplus mode but call rates are on the rise

The spike in borrowing could be explained by the possibility of liquidity turning tight ahead of advance tax outflow, which has started

Overnight call money rates are on the rise even as the banking system liquidity remains in a surplus mode.

The rise in overnight call rates is independent of rising bond yields in the 10-year segment. Overnight rates fluctuate based on liquidity available in the system. The Reserve Bank of India (RBI) tries to keep liquidity sufficient enough so that the weighted average call rates are anchored around the policy repo rate, presently at 6.50 per cent.

The problem, though, is that the liquidity is skewed. Some big banks, with good deposit base, possess higher liquidity, whereas the smaller banks are