Banks on Friday said they borrowed Rs 18,175 crore, the largest amount on a net basis, from the Reserve Bank of India (RBI) since the second liquidity adjustment facility (LAF) was launched. They also parked Rs 1,770 crore with the apex bank.
Bank have also borrowed over Rs 7,000 crore in call markets at around 5%.
Market saw no issuances of certificates of deposit on Friday because mutual funds, the major investors in such papers, preferred to hold on to cash and were bidding at higher rates, dealers said.
On Friday, state-run banks were looking to issue one-year CDs at 6.40-6.45% while investors were asking for 6.50-6.55%.
?Mutual funds preferred to remain on the sidelines as they may face redemptions from banks next week for payment towards corporate advance taxes,? said a dealer with a mutual fund.
Around Rs 30,000 crore will move out of the banking system by June 15 towards first installment of corporate advance tax for 2010-11 (Apr-Mar).
Rates of short-term papers have also fallen by 25-30 basis points since Thursday as fears on further liquidity tightening subsided.
?The rates on extreme short-term papers such as 15-20 day papers were trading at 6.50-7.00% levels this week as mutual funds sold papers on redemption pressures. Now, with the liquidity fear dimming, rates are going back to previous weeks levels,? said a dealer with a state-owned bank.The three-month CDs were quoted at 5.75-5.95% against 5.80-5.95% on Thursday.