With liquidity improving and credit demand inadequate, banks are parking their funds with the apex body, Reserve Bank of India (RBI) through the reverse repo window.

Under the liquidity adjustment facility (LAF) conduced by the RBI on Monday, banks tapped the reverse repo window and deposited as much as 1,22,000 crore in two chunks of 33,915 crore and 33,915 crore. These funds will help the banks to earn an interest rate of 3.5%.

On the other hand, banks did not borrower any funds through the repo window. Earlier also when the central bank conducted a LAF operation on Thursday April 2nd, banks did not tap the repo window and parked nearly Rs 70,000 crore through reverse repo route.

Further with the easing liquidity, call market rates hover between 2.1% and 3.9% with the weighted average estimated at 3.53% as per the data available on the website of Clearing Corporation of India.

Call rate is the inter-bank interest rate for funds deposited in a bank for an indefinite time.

A dealer with PSU bank said, "With liquidity remaining more than sufficient, there was no pressure on the call rate even though this is a reporting week." Normally the rates rise during the initial part of the reporting week as banks demand funds to meet the set requirements.

Even the lending rates for collateral backed borrowings stand between 0.1% and 3% with weighted average hovering at 1.29%.

Meanwhile dealers said that liquidity in the system has also increased due to the redemption of government securities and thereby prompted banks to knock the reverse repo window.