Banks are under some serious cash crunch as they borrowed a record Rs 2.5 lakh crore from RBI

There is something going very wrong in the banking sector. The banks are facing acute cash shortage and this is forcing them to borrow from the RBI to meet payment obligations.

The banks borrowed a whopping Rs 2.5 lakh crore from the Reserve Bank of India (RBI), the highest ever in a normal day.

The rates jumped to a high of 7.6%, about 85 basis points more than the policy repo rate of 6.5%.

"This stresses the banking system in a shorter term. There is a frictional liquidity issue ahead of the fiscal end on account of government surplus and UDAY bonds issues leading to cash outflows," Ashish Vaidya, head of trading at DBS Bank, told ET.

(Image: Reuters)