Before this let's have a look at how money market works:
So on Friday, The RBI conducted a three-day Variable Rate Repo auction to infuse ₹75000 crores into the banking system to cool overnight call money market rates against which they had received aggregate bids of ₹122170 crores.
Why because clients of banks demanded money for the payment of GST which tightens the liquidity of banks.
In this situation, call money rates shot up (Surplus funds lending money at higher rates to deficit fund banks), and to control this RBI infuses money @ cut-off 4.09% and brought the rates near to repo rate.
The overnight call money moved in the 2.20-4.55 % range on Friday and on Thursday, it had touched 4.65% as per CCIL data.
Happy reading......!!!!!!
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