A shortage of money in the system pushed up call rates past the 6% mark on Monday even as banks picked up close to Rs 46,000 crore from the Reserve Bank of India (RBI).

The call rate, which has been in the region of 6% since mid-September, closed at 6.18% on Monday. The money market is tight on account of advance tax outflows, which has sucked out nearly Rs 40,000 crore from the banking system. The RBI will conduct an auction for Rs 11,000 crore worth bonds on September 24. The securities to be auctioned are 7.99% bond maturing in 2017 for Rs 5,000 crore, 7.80% bond maturing in 2020 for Rs 4,000 crore and 8.30% bond, due 2040 for Rs 2,000 crore.

Banks borrowed Rs 45,695 crore from the central bank’s repo window on Monday, compared with Rs 42,290 crore on Friday.

The central bank, in its first mid?quarter policy review, released last Thursday, hiked the repo rate by 25 bps from 5.75% to 6.00% and the reverse repo rate by 50 bps to 5.00% from 4.50%. The LAF corridor marked by the repo and reverse repo rate has therefore narrowed from 125 bps to 100 bps in a bid to to pin down volatility in short?term interest rates.

Banks then borrowed close to Rs 51,000 crore from the RBI on Thursday.

Joydeep Sen, SVP, (advisory), BNP Paribas Wealth Management said, ?The RBI’s stated stance is to maintain repo as the reference rate as against the reverse repo. However, as and when inflation eases and private sector borrowing picks up, they may change stance. That would be the turning point for improvement in liquidity.?

Meanwhile, volumes in the certificate of deposits (CDs) market crossed the Rs 9,800 crore mark as banks rushed in to borrow money via CDs.

Three-month CD rates are trading at 7.13%, while one-year at 8.05%. Sen believes that rates on CPs and CDs will improve as and when the liquidity scenario improves, say in November or December.

?CP and CD rates are driven more by liquidity conditions than the RBI rate action. Banks are borrowing through CDs now as the require liquidity; corporates are borrowing through CPs as the base rate has increased the cost of bank borrowing. As and when liquidity improves, banks may not borrow as aggressively,? he observed.

YES Bank kicks off fresh round of rate hikes

YES Bank has kicked off the process of rate hikes increasing its benchmark prime lending rate (BPLR) by 50 basis points to 17.5% on Friday.

The Reserve Bank of India (RBI) had increased key policy rates last week. YES Bank, which had revised upwards its BPLR by 50 basis points to 17% recently, further hiked its rate to 17.5.%. Currently the the base rate of the bank is pegged at 7%

Other private sector and?state owned banks are planning to take a call on base by this month end. S Raman, CMD, Canara Bank said he expected an upward bias on both BPLR and Base rate as well.

?I think that Canara Bank will be reviewing its festive offers. Deposit rates are also likely to go up. But, we will take a view on the entire situation this week.”

JP Dua, CMD, Allahbad Bank said, ?There is a pressure on interest rates after RBI’s move. However, Dua said the bank still will have discounted rates for retail customers. If the base rate goes up the retail rates will also go up. But the bank currently provides 25 to 75 bps discount on retail loans, which will continue till Dec 2010,” Dua observed.

MD Mallya, CMD, Bank of Baroda said that the bank will be reviewing its base rate by the end September. ?Let me add that the base rate is dependent on various factors and cost of deposits being prominent among them,” he said. During the half quarterly review of its annual monetary and credit policy, RBI had raised its repo rates by 25 bps to 6% while hiking the reverse rate by 50 bps to 5%.