Source : BS :Reuters / Mumbai March 21, 2011, 20:22 IST
Banks raised Rs 2,980 crore via certificates of deposits (CDs) on Monday, compared with Rs 1,895 crore on Friday.
Yield on the three-month Reuters CD benchmark was at 9.95%, higher than 9.85% at its previous close, and the one-year Reuters CD fixing was at 10.05%, higher than 10% on Friday.
"Liquidity crunch in the banking system is keeping the short end rates higher. Being year end mutual funds are active buyers while banks are rolling over CDs keeping the demand firm," a senior dealer with a state-run bank said.
"The view that there may be another rate hike ahead because of the stubborn inflation is pushing up the short end rates higher," a dealer with a foreign bank said.
Last week, the Reserve Bank of India raised interest rates for the eighth time since last March, in line with expectations, and warned both of inflationary pressures and emerging risks to growth.
Liquidity situation, which is still strained in the banking system post the advance tax outflows, is expected to ease next week once the government ploughs it back to the system.
Banks borrowed a total of Rs 78,890 crore from the central bank's twin repo auctions, lower than Rs 1,40,000 crore on Friday.
According to Thomson Reuters data, volumes in the secondary market were at Rs 445 crore, lower than Rs 450 crore on Friday.
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