Short-term rates, particularly in the one-month tenure, have eased significantly in the past one month due to comfortable liquidity. These include Certificates of Deposit (CDs) and Commercial Paper (CP).
However, experts say, further easing is likely to be limited, as banks might need to attract more deposits to meet an expected rise in credit demand.
Borrowing by banks under the Reserve Bank of India’s (RBI’s)Liquidity Adjustment Facility (LAF) dropped to Rs 4,525 crore on Friday, compared to the daily average of Rs 55,310 crore a month earlier. The easing is due to the flow of government spending into the system.
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