Bond market sees signals of normalisation in RBI move on 7-day reverse repo

The central bank is tight-lipped about normalisation, even as other global central banks have started sounding hawkish

In what is being interpreted as a normalisation signal by the bond market, the Reserve Bank of India (RBI) on Tuesday let the cut-off for the 7-day variable rate reverse repo at 3.99 per cent, or the existing repo rate.

RBI accepts excess overnight liquidity from banks at 3.35 per cent, its reverse repo rate. But it also conducts a separate variable rate auction for a longer period under its variable rate reverse repo window. Ideally, the rate should be closer to the reverse repo rate, but the latest cut off touches the repo rate of 4 per cent.

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