Addressing market concerns: A Balasubramanian

This policy has also brought down the differential between the repo and marginal standing facility rates

The Reserve Bank of India (RBI) policy has been addressing market concerns in order to create predictable scenarios for the players. This policy has not only cut rates, it has also brought down the differential between the repo and marginal standing facility rates. This move will further help reduce the cost to the banks, which, in turn, can help in passing on the benefits to borrowers in the form of reduction in rates. Introduction of marginal cost-based lending rate from April 1, should help in determining short-term interest rates below the base rate. As a result, accessibility to low-cost financing could become relatively easier. This policy has also addressed the need for having higher predictability to the liquidity in the banking system. Giving foresight on the potential open market operations' calendar is something which takes care of managing volatility arising out of liquidity behaviour in the market. This will ensure the banking system has fewer factors to worry about from the regulatory requirement point of view and focus on building business.

A Balasubramanian
Chief executive officer, Birla Sun Life Asset Management