Banks park less than regular amount with the RBI
By Vaibhav Aggarwal
May 12, 2009
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During the money market operations held on May 11th, banks were seen to park less than the regular amount with the Reserve Bank of India. Banks parked only Rs 1.23 crore with the central bank on the first day of the reporting fortnight.

The dealers say that the arbitrage between the overnight money markets and the RBI's reverse repo operations have disappeared as interest rates have increased in the money markets.

A dealer at Canara Bank said that, "This is the first day of the reporting fortnight and banks are consequently facing some shortage of funds."

"Rates should be back to normal in a day or two," he added.

As per the Clearing Corporation of India Limited, the yield on the 6.05% note that is due to mature in February 2019 was seen unchanged at 6.38% when the market closed on Friday.

Meanwhile the rupee increased to its highest level as compared to dollar in the past three months. The rupee was recorded at 49.31 against the dollar from 49.29 on the previous close. Last time the rupee has climbed to a close of this level of 49.05 on February 17th.

Recently the banks have been noticed to park more with the RBI through the reverse repo window. Despite of the monetary authority slashing down the interest rates, banks continue to park excess funds with the RBI at the back of adequate liquidity and low credit demand.

RBI has recently cut down the reverse repo rate by 25 basis points to 3.5%.


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