Overnight call rate tops RBI's repo rate for 1st time since March
India's overnight call rate shot up to 5.81% on Wednesday, topping the RBI's policy rate of 5.5%.
This signals a squeeze in available cash for banks and hints at bigger shifts in how money moves through the system.
Why does this matter?
When call rates rise above the RBI's benchmark, it means there's less extra cash floating around—thanks to big tax payments and banks pulling out funds.
This could make borrowing costlier for everyone and might slow down bank activity in upcoming RBI auctions, which affects how easily money flows across markets.
What's behind the squeeze?
It mostly comes down to a double whammy: banks yanked out lots of cash during recent RBI auctions, and hefty GST payments drained even more from the system.
The RBI is now tweaking its tools—like running smaller liquidity-draining auctions—to help calm things down before its key policy meeting on August 6.
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