Towards policy normalisation

A delay by RBI could increase risks

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is widely expected to maintain the status quo on both the policy rate and stance in its meeting starting today. Financial markets would, however, want to know if the central bank is now prepared to start the policy normalisation process, or it still wants to wait and support growth by maintaining excessively high levels of liquidity in the system to keep market interest rates low. Short-term market rates have been below the reverse repo rate for quite some time. Aside from flooding the system with liquidity through instruments