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Call money interest rates shoot up to seven-month high

The call money interest rates shot up to the 30 to 35 per cent level, a seven-month high, on hectic covering by banks and other participants as the monetary measures announced by the Reserve Bank of India on Thursday created heavy pressure on funds.

The rates opened higher, immediately rose sharply to 30 to 35 per cent, dealers said. The participants were busy covering their positions in view of the holidays before the reporting Friday next week.

However, the rates came down later, with renewed liquidity and lower demand, around noon and was ruling in the range between 10 to 15 in the afternoon before closing at 9-10 per cent level.

The Security Trading Corporation of India was absent from the market today. A senior STCI official said, "We are intermediaries in the overnight money market. Any participation by us will only add fuel to the fire."

Dealers also felt that since the call money rates have pierced the new Repo rate of 8 per cent level, players would find it more profitable to lend funds in the market than employ Repo securities.

"In any case, the Repo rate will act as a floor to the call money rate," a dealer said.

UNI