Posted 1/29/2024, 12:29:58 AM
Record High Repo Rates Reflect Liquidity Crunch As Credit Growth Outpaces Deposits
- Daily average value of market repos hit record high of ₹1.46 lakh crore between April-Nov 2023, 15% higher than 2022-23 average
- On Jan 26, repo volumes closed at ₹1.51 lakh crore with weighted avg rate of 6.79%
- High repo rates reflect liquidity deficit in banking system pushing up short-term borrowing costs
- Liquidity deficit owed to credit growth outpacing deposits and slow government spending
- Higher bank funding costs passed on to rates on commercial papers and certificates of deposit