The interbank call money rate is primarily determined by the demand and supply of funds in the interbank market and is used as a benchmark rate for other short-term lending rates.
By India Today Business DeskIndia’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, reported news agency Reuters.
The development comes on the last day of the financial year, said the report quoting traders.
The report indicated that the three-day call money rate jumped to 8.10 per cent, which is the highest since March 29, 2019, while the Reserve Bank of India’s repo rate and Marginal Standing Facility Rate stood at 6.50 per cent and 6.75 per cent, respectively.
Traders said standalone primary dealers are on the borrowing side. One trader with a primary dealership told the news agency that banks “are not even willing to lend high amounts even at 8 per cent”.
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It may be noted that the interbank call money rate is the interest rate charged by one bank to another for borrowing funds for a short time, usually a day. It is exactly like when a person borrows money from someone and promises to repay it the next day but with interest.
The rate is primarily determined by the demand and supply of funds in the interbank market and is used as a benchmark rate for other short-term lending rates. It is often an important indicator of the overall liquidity and health of the banking system.
Harvey Wiegand
Kole Prosacco
Wilmer Bode