Run up to MPC review: RBI actively focusing on policy rate transmission

Amid fiscal consolidation, heavy lifting by central bank to support economy

With a liquidity infusion of close to ₹8 trillion in the last three months, and showing intention to do more, the Reserve Bank of India (RBI) seems to be in a hurry to speed up monetary transmission of policy rates to the lending and deposit rates by easing financial conditions.

 

Bond prices surged after the central bank’s surprise announcement of ₹80,000 crore open market operation (OMO) to pump liquidity into the banking system by purchasing bonds in April, with the 10-year benchmark yield declining 10 bps on Wednesday to close at 6.48 per cent, the lowest level in three years.