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Informist, Friday, Apr. 18, 2025

 

MUMBAI - The Reserve Bank of India is reviewing its liquidity management framework to ensure better monetary policy transmission, Governor Sanjay Malhotra said Friday, according to officials attending the annual Fixed Income Money Market and Derivatives Association of India-Primary Dealers Association of India conference at Bali, Indonesia.

 

Dealers said the central bank chief indicated he wanted to align the policy repo rate, currently at 6.00%, with rates in the collateralised triparty repo and money market repo segments. The governor's comments echoed statements from RBI officials made after the April Monetary Policy Committee meeting. Malhotra noted that the four-year old framework, adopted in 2020, needed an overhaul to increase the trust of monetary policy-making.

 

The weighted average call rate is the operating target of monetary policy, but is determined by the call market, which makes up only around 2% of the money market volumes. Its divergence from the weighted average rates in the collateralised markets differs by up to 15 basis points. This divergence had implications for both macroeconomic stability and financial markets, Malhotra said.  End

 

Reported by Srijita Bose

Edited by Vandana Hingorani

 

 

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