RBI's liquidity move lifts weighted average call money rates by 12 bps

The Reserve Bank's liquidity measures announced last week to drain surplus from the banking system lifted weighted average call money rates by 0.12 per cent on Monday, experts said.

The measures, including moves to increase the daily CRR maintenance limit to 99 per cent and bond sales through open market operations, will also help accelerate rate hike transmission, they said.

The weighted average call money rate on Monday stood at 5.43 per cent against 5.31 per cent on October 9, according to the Clearing Corporation of India's (CCIL) data.

Money market experts said high surplus liquidity in the banking system can weaken the transmission of a policy rate hike by reducing banks' dependence on market borrowings and allowing them to meet credit demand using readily available funds.

When banks have ample liquidity, they face less pressure to raise deposit rates to attract funds, which can delay an increase in lending rates for borrowers.

The excess liquidity also keeps short-term money