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Informist, Wednesday, Apr. 8, 2026

 

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--RBI Malhotra: OIS very thin mkt, not much should be read into it 
--RBI Malhotra: Govt bond mkt very deep, let it determine its price 
--RBI Malhotra: Intent is to keep weighted avg call rate near repo rate 
--RBI Malhotra: Lower money mkt rates not a signal for lower interest rates 

 

MUMBAI – Reserve Bank of India Governor Sanjay Malhotra Wednesday dismissed any concerns arising from the recent rise of the overnight indexed swap rates. "OIS is a very thin market, not much should be read into it," Malhotra said during the post-monetary policy press conference here. 

 

The one-year swap rate has risen around 37 basis points since the military conflict began in West Asia on Feb. 28. On Apr. 2, the swap rate ended at 6.37%, the highest closing level since Jan. 23, 2025. The market was earlier expecting the central bank to raise key interest rates by 75-100 basis points in 2026-27 (Apr-Mar). However, after the US and Iran agreed to a two-week ceasefire late Tuesday and following the RBI governor's comments during the monetary policy announcement, the market now does not expect any rate hike till September.

 

Commenting on the high yields of government bonds, the RBI governor said the market determines their prices. "These prices are determined, whether it is the forex markets, whether it is the bond yields, etc, these are determined by the markets," Malhotra said after detailing the first bi-monthly monetary policy statement for FY27. "We have deep markets for the government bonds, some of the benchmark government bonds. And we let the markets determine their prices."

 

Asked about the low weighted average call rate and any likely announcement of any measures by the central bank to support rates by deploying a variable rate reverse repo auction, the governor said the RBI had consciously let the rate be at the lower end of the liquidity adjustment facility corridor. "When there is so much of an uncertainty, we want to give the comfort to the banks that liquidity will not be in deficit. And so, that's why we have allowed it (weighted average call rate) to be in the lower end," Malhotra said. "It's not outside the LAF. And it's only to give them the comfort. It is not any signal for a rate reduction or anything," he said.

 

The weighted average call rate remained near the RBI's Standing Deposit Facility rate of 5.00% in the past few sessions due to ample liquidity in the banking system. Since the last Monetary Policy Committee meeting in February, system liquidity stood at an average daily surplus of INR 2.3 trillion and the weighted average call rate traded in the lower half of the Liquidity Adjustment Facility corridor except towards the end of March. In fact, the liquidity surplus in the system was INR 4.02 trillion Tuesday, the highest since Aug. 2. 

 

The governor reiterated that the central bank will remain proactive and pre-emptive in managing liquidity conditions to ensure the financial system has adequate funds to support the needs of the economy. On Wednesday, the Monetary Policy Committee decided to keep the repo rate unchanged at 5.25%. Accordingly, the SDF rate remains 5.00%, while the marginal standing facility rate and bank rate remain 5.50%. The MPC also retained its neutral stance, allowing flexibility to respond to evolving conditions.  End

 

Reported by J. Navya Sruthi

Edited by Tanima Banerjee

 

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