India's currency market trading volume hits record high as state-owned banks boost lending, pushing up short-term interest rates

(1) Data shows that trading volume in India's money market has surged to a record high, mainly because state-owned banks have intensified lending to meet strong credit demand. (2) According to analysis by the Indian Clearing Corporation, another driving factor is that in May, private banks unusually shifted from net borrowers to lenders. In the triparty repo segment, which accounts for about 70% of the money market, trading volume climbed to a record high of 5.5 trillion rupees ($57.8 billion) on May 13 and has remained elevated since then. (3) However, the scramble for funds in recent weeks has pushed up overnight lending costs and short-term bond yields, highlighting the ongoing difficulties banks face in attracting deposits as household savings flow into other investment products.