Dealers were not sure what had caused the sudden pressure on rates but felt large outflows ahead of the reporting Friday led to the surge in overnight rates. "A few foreign banks were heavy borrowers at close. It is either a large outflow in domestic clearing or they were hit in the swap market," a dealer with a state-run bank said.

Call money rates ended in a broad range 18.0-25.0 per cent range compared with the previous close of 9.25-9.50 and the morning's 10.0-12.0 per cent. Dealers said stray deals were struck around 25-30 per cent and several lenders quoted 20 per cent at close.

The central bank interventionwhich helped the rupee rebound from lows of 43.59 on Monday could have also drained rupees, they said. Dealers said the problem had been aggravated since Friday is the reporting day for banks when they keep borrowings to a minimum.

Most dealers said the tighter liquidity was just a build-up of the mismatch in fund flows which had been felt over the past week. Other dealers said falling prices of government securities had led to many big lenders diverting funds from the call market to investments in bonds.

Outflows of Rs 3000 crore into a 10-year bond auction last week and an estimated Rs 2000 to 2500 crore into the Reserve Bank of India's (RBI) open market operations sine Friday were partly responsible for the crunch in liquidity, dealers said.

"Part of the surge was just psychological. There is never an explanation in markets once rates cross the 10 percent level," a dealer with a private bank said. "If I were a lender, even I'd feel why not try and ask for 20 per cent instead of 12," he said.

The 10per cent level is normally viewed as a resistance level for call money rates as it is the rate at which banks and primary dealers can get additional refinance from the central bank. This is in addition to some funds which are available at eight per cent.

Even as the spot rupee remained steady, the forward currency market was very volatile on Thursday with the State Bank of India (SBI) turning a receiver (undertaking buy-sell swaps) after the heavy bout of paying (sell-buy swaps) the previous day. The market was unsure which of these operations were on behalf of the central bank since the SBI often acts on its behalf in the currency market.

"Products for two days would have been affected if any calculations had been upset today," a dealer with a state-run bank said. Dealers said they expected the pressure on call rates will continue in early deals on Friday but ease subsequently as banks complete their borrowings for the reporting period.