Commercial banks returning from a long holiday week soaked up the excess cash in the banking system, pushing up inter-bank interest rates.
The inter-bank borrowing rate rose to the 7.75 per cent level, from 7.50 per cent on Monday and a flat 7.40 per cent throughout the previous week. rn
rnMoney market analysts say heavy withdrawals prior to the Vesak week had lowered the banks statutory reserves. rn
rnAs a result todays event was seen as lquote standard practice, where the banks shore up their reserves with borrowing from the banking system. rn
rnAnalysts expect inter-bank rates to return to the 7.40 per cent levels within this week, when most of the money that went out as withdrawals find it way bank into the banking system.rn
rnExcess liquidity was averaging Rs. 10 bn in recent weeks.rn
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