The RBI has been raising the repo rates, making interest on loans and deposits higher in banks across the country, to control cashflow and bring down inflation. Within themselves, larger banks use a separate repo rate to pick up short-term loans, at the most for a week, known as the interbank call money rate. After ending last week at 5.25 per cent, the call rate has risen to surpass the RBI's own repo rate at 5.90 per cent before closing on Monday.
The cashflow within the banking system has a surplus liquidity of Rs 57,927 crore, down from Rs 97,497 crore last week. This may fall further as GST payments as well as payment for government bonds are on the horizon. The government had raised 30,000 crore by auctioning those bonds.
The repo rate increased because banks borrowed more since liquidity went down. RBI data had also showed that banks have doubled borrowing to support their credit growth, as demand for loans is up while deposits aren't rising at a similar rate.
