Borrowing rates for govt, companies to decline following withdrawal of Rs 2000 notes. Here’s why
Withdrawal of Rs 2000 notes to decrease borrowing rates: The removal of Rs 2000 notes is expected to increase the liquidity of the banking system, leading to a short-term reduction in bulk borrowing rates for the government and corporations. Lower rates on short-term money market instruments, including certificates of deposit and treasury bills, are expected due to the growth in bank deposits and liquidity. Impact on borrowing rate for companies: Deposit deadline is on September 30, and as people queue up to deposit the notes, between 50,000 and 1 lakh crore are expected to enter the system, potentially impacting borrowing rates. Government bond yields with a shorter maturity are also anticipated to fall considerably as banks are required by law to reserve a certain percentage of deposits in national securities. For more reads : 2000rs notes
