Reserve Bank of India Governor Shaktikanta Das, while reading out the decisions of the rate-setting panel on monetary policy, announced that the RBI, in its transition to normal liquidity operations, decided on Wednesday to restore market hours – from 9 a.m. to 4 p.m. 5:00 pm – with respect to call/notice/term money, commercial paper, certificates of deposit and repos in corporate bond segments of the money market, as well as rupee interest rate derivatives.
Das said: “As part of our gradual transition to normal liquidity operations, we have decided to restore market hours – from 9am to 5pm – with respect to call/notice/term money, commercial paper, certificates of deposit and corporate bond repos. bond segments of the money market and for rupee interest rate derivatives.”
“The extension of time for HTM categorization of new bank investment in bonds to March 2024 paves the way for stability in the bond market/financial sector and future government borrowing. Overall pragmatic monetary policy revisions by RBI taking into account the uncertainties and volatility both on the domestic and international fronts,” said Divam Sharma, co-founder of Green Portfolio.
Meanwhile, the RBI’s Monetary Policy Committee raised the repo rate by 35 basis points (bps) to 6.25 percent with immediate effect on Wednesday, making borrowing expensive. The policy rate is now at its highest level since August 2018. The RBI maintains the policy position of ‘housing withdrawal’.
The RBI on Wednesday lowered its growth forecast for FY23 from 7 percent earlier to 6.8 percent. However, the central bank maintains its retail inflation forecast for FY23 at 6.7 percent.
Also, the rates for both the permanent deposit facility (SDF) and the marginal standing facility (MSF) were increased by 35 basis points each to 6.00 percent and 6.50 percent, respectively. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
Bank interest has also risen from 6.15 percent to 6.5 percent now.
This is the fifth consecutive increase in the repo rate this year. With this latest increase, the RBI’s rate-setting panel has raised its key policy rate by a total of 225 basis points this year to keep inflation in check. The repo rate is the interest rate at which the RBI lends to the commercial bank.
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