MUMBAI: May 2: The call money market which had been passing through a passive phase was activated once again by the uncertainty over the liquidity position due to the confusion on whether the Reserve Bank of India will retain the oversubscription to the recent loan auctions. The overnight call money rates increased by 5 %.

Banks increased their borrowing to guard against possible liquidity problem due to the huge outflow of funds to the fresh auction of state government loans. The call rates which opened higher at the 5 % level, edged up to 9 % and finally settled at 7-8 % level. The new interest in the call money funds was due to demand from bidders for state loans who await the RBI announcement for the notified amount of Rs 2500 cr at the coupon rate of 13.05 %. Uncertainty over the bids accepted by the RBI at the loan issue on Wednesday was the reason for the rise.

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