Due to high interbank call money rates, the Reserve bank of India also did not receive any application for a three-day fixed repo. "Most banks went in for a one-day repo at a high rate of 9 per cent as locking money in the three-day fixed rate repo did not make much sense," money market sources said.

Bankers said that the rates went up on account of the long weekend, and as a result there was a huge demand for funds in the market by borrowers wanting to cover their position. Traditional lenders like the Life Insurance Corporation (LIC) was not present in the market today.

"The volatility in the currency markets would continue to exert pressure on the money markets and average call rates are expected to be at 6-7 percent bank capped by the export refinance rate," a commentary from ICICI-Securities said. The one-month forward closed at 8.27 (7.8) per cent and the three-month forward closed at 8.37 per cent (8.15).

The interbank call rates opened at Friday level of 6-6.50 per cent in the morning. According to money market sources, due to huge borrowing by private sector and foreign banks wanting to cover two days position firmed up the call rates further. The call rates closed at the interbank refinance level of 9 per cent in the afternoon. The inflow into system by way of a fixed rate repo was to the tune of Rs 2,200 crore.

According to money market sources, major nationalised banks kept away from the overnight call money market which contributed to tightening in the interbank rates as demand for funds was more than the supply.

"There is not much liquidity in the system currently as the Rs 3,000 crore three-year auction sucked in access liquidity from the system and liquidity is currently in the hands of fewlenders," said an official from a private sector bank. The RBI also mopped up Rs 2,000 crore last week through open market operations.

Market experts expect the overnight interbank call rates to rule easy on Tuesday as an estimated Rs 2,138 crore in expected to come into the system due to the redemption of the 1998 government paper offering 13.65 per cent. "The call money rates are expected to hover around 6-7.5 per cent on Tuesday," sources said.