Interbank Call Money Rate Increased To 4-Year High On Last Day Of Financial Year
India’s interbank call money rate, or the rate at which banks lend and borrow money from each other on a short-term basis, has jumped to its highest level in four years, reports said.
The report quoted traders as saying that the development occurred on the final day of the fiscal year.
The three-day call money rate increased to 8.10%, which is the highest level since March 29, 2019, according to the report, while the Reserve Bank of India's repo rate and marginal standing facility rate were 6.50% and 6.75%, respectively.
Independent primary dealers are on the borrowing side, according to traders. Banks "are not even willing to lend high amounts even at 8%," one trader with a primary dealership told the news agency.
It should be noted that the interest rate a bank charges another for borrowing money for a brief period of time—typically a day—is known as the interbank call money rate. Similar to borrowing money from someone and promising to pay it back the following day with interest.
The rate serves as a benchmark for other short-term lending rates and is primarily determined by the supply and demand of funds in the interbank market. It frequently serves as a crucial gauge of the overall liquidity and soundness of the banking system.