Key Points
Overnight funding costs in India have surged above the central banks policy rate, a sign that the excess cash in the banking system has dried up...
At 6.78% on Wednesday, its just hovering above the upper band of the Reserve Bank of Indias interest-rate corridor of 6.75%...
The excess cash that banks park with the RBI has dwindled to 788 billion rupees ($9.6 billion), from as high as 9 trillion rupees in 2022, as the central bank delivered a series of rate hikes to tackle inflation..
That may mean there is no justification for more hikes with the April inflation print also likely to sharply ease, Das said.. Bandhan Asset Management Ltd. says treasury bill rates have risen to attractive levels while Quantum Asset Management Ltd. is advising shorter-term investors to buy liquid funds...
The current liquidity tightness phase is being driven by diminishing core liquidity unlike previous recent episodes which were more owing to higher government cash balances, said Suyash Choudhary, head of fixed income at Bandhan Asset Management..
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