India cenbank seeks market views on aligning call money rate with repo, sources say

By Siddhi Nayak and Dharamraj Dhutia

Mumbai, – The Reserve Bank of India has Sought Feedback from Large Market Participants on Aligning The overnight Interbank Call Money Rate More Closely With the Policy REPO RAPO RATE of the discussions Told Reuters on Monday.

The move follows a reuters report last week that Said the RBI Wants the overnight call to broadly align with the policy repo rate and is considering steps to ensure that.

The policy rate currently stands at 5.50%, While The Overnight Call Rate Average 5.30%and the Treps Rate HOVERS NEAR 5.20%. The overnight call rate and treps rate have averaged below the policy rate since April.

A Persistent Gap Between the RBI’s Operative Rate and the policy rate typically Signals that banks are accessing cheaper funding than what the central bank is comfortable with.

The RBI Spoke with Large Treasury Officials on Friday to revision Liquidity Conditions and Understand Why The Overnight Call Rate – The Operative Policy Target – Has Been Persestly Training The Repo Rate, two of the sources said.

None of the sources were wanted to be named because they are not autorized to Speak to the media. The RBI did not immomelyly reply to a reuters email seeking comment.

The Central Bank is also keen to understand why treasury bill yields have spiked in the last week, the two sources added. The yield on 364-day notes was sharply Higher Than Estimates Last Wednsday.

“The motive see to be to sensitise the market that a variable rate reverse repo auction would be in the offing,” a Senior Official at a State-Run Bank Said.

The source had added that the RBI Block Start Conducting Variable Rate Reverse REPO Auctions to Suck out Surplus Liquidity as and when required.

The weighted average overnight call rate has reminded well below the RBI’s Key Repo Rate and Closer to the Policy Corridor’s Floor, The Standing Deposit Facility Rate, For the Past Few WeekS.

On June 6, The RBI Slashed Its Key Policy Rate By 50 Basis Points, but Changed Its Stance to Neutral, Indicating Limited Room for Further Cuts. The RBI also announced a reduction in banks’ Cash Reserve Ratio by 100 Basis Points SepteS Septemer Onwards.

The Central Bank also Stopped Conducting Daily Fund Infusion Through Variable Rate REPO SINCE JUNE 11, which market took as an indication that that RBI May Move Towards VRRRRRRRI Soon.

Market Participants have Requested that RBI Avoid Shocks in Liquidity Management which would help Avoid Volatily in Short-Term Rates, Another Treasury official Said.

“Given that focus of monetary policy is on enhancing transmission, the expectation channel is also important. Time, Allowing Transmission to Gain Pace, “Said Gaura Sen Gupta, Chief Economist with Idfc First Bank.

This article was generated from an automated news agency feed without modifications to text.