Saturday, April 26, 2008 | | |

The banking industry is sitting on a huge pile of funds ahead of the next week’s credit policy review. As against an outgo of Rs 18,500 crore towards the cash reserve ratio (CRR) over the next two fortnights, banks are parking surplus funds, in the range of Rs 20,000-25 ,000 crore, with the Reserve Bank of India (RBI) on a daily basis.

Taken together — funds floating in the call money market, the market for collateralised borrowing and lending obligations (CBLO) and funds parked by banks with the central bank under the reverse repo window — surplus cash flows in the market could be closer to Rs 1,00,000 crore.

Treasury officials say that such surplus cash conditions may surely prompt RBI to announce further rate actions. These could include selling more bonds under the market stabilisation route or worse still, a hike in key rates — repo and reverse repo rates.