Call money eases to ends at 7.80-7.90 per cent

Mumbai, Feb 20 (UNI) Call money closed 10 basis points lower at 7.80-7.90 per cent today, compared to yesterday's closing of 7.70-7.80, on hopes that measures taken by the Central Bank and the government may tame inflation, which is running at more than a two-year high.

Last week's cash reserve ration (CRR) hike by the RBI, was its third policy tightening since early December. The Central Bank, last Tuesday had announced that it would raise CRR rates to six per cent in two steps to rein in a running inflation at 6.58 per cent for the 12 months ended January 27.

The two-stage increase in the CRR to 6.0 per cent will drain an estimated Rs 14,000 crore from the banking system. After the previous CRR rise, the resulting cash squeeze saw overnight interest rates spike to a nine-year high of 21 per cent.

Thus, the CRR rise would help absorb funds that were being added to the banking system as a result of suspected RBI intervention in the foreign exchange market to cap the Rupee, which hit a 16-month high of 44.03 per dollar last Friday.

UNI