The amount parked by banks today at the reverse repo window of the Reserve Bank of India (RBI) dipped below Rs 20,000 crore, lowest since April 2009, as they preferred to keep cash with them ahead of the long Christmas weekend and for investments in securities.
Dealers said besides three holidays, banks were deploying funds in short-term loans in an effort to prop up their top line (business) before the close of third quarter (December 31).
Today, RBI absorbed Rs 19,785 crore at its reverse repo window under its liquidity adjustment facility compared with Rs 37,050 crore yesterday.
A senior State Bank of India official said that liquidity has declined. Also some banks were using funds to purchase five and 10-year securities as yields have peaked, he added.
The price and yield on bonds move in reverse direction. “We feel bond prices will move up while yield will ease, it provides to make gains,” said dealers with a public sector bond house.
The call money rate ended at 3.50 per cent today because demand for funds rose as banks had to meet their reserve needs for five days, dealers said. The market will remain closed on Friday and Monday for Christmas and Moharram, respectively.
“Demand was strong today. Also, supply was less in the market, as everybody had to maintain reserves for five days. So, there were less lenders,” said a dealer at a private bank.
