In the light of the liquidity squeeze that RBI has been doing, the impact seems to be hitting the market now. After three days of hectic auctions (22,000 cr, of Cash Management Bills, 12,000 cr. in T-Bills, 8,000 cr. of State Government Loans and 1,000 cr. of Inflation Protected Securities) we now see the impact of low liquidity: Banks are borrowing at the 10.25% MSF rate.
And nearly 70,000 Cr. (700 bn) of it.
Read more about the Marginal Standing Facility.
This is going to get interesting. Now wondering when banks will raise deposit rates.