A week of tight liquidity beckons
MUMBAI: Advance tax outflows and a fresh market stabilisation schedule promise a check on banking system liquidity next week.
Overnight call money rates nearly doubled to 10.35% on Friday from 5.38% on Thursday as banks were clearly caught napping on reporting fortnight.
Fridays spike was the second-biggest seen in calendar 2007, after the 10.5% levels touched on January 2. Call rates are expected to stay high in the next few sessions.
Advance tax payments will flow out of the banking system into government coffers starting next week. The breather on liquidity depends a lot on how fast the government will spend this. Analysts said with the financial year-end looming, government departments may spend faster to exhaust budgets, accelerating the flowback of funds.
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