RBI Restores Bond Market Timings; What Investors Should Know

Reserve Bank of India Governor Shaktikanta DasReading out the decisions taken by the Rate Setting Panel on Monetary Policy, announced that reserve Bank of India As part of its move towards normal liquidity operations on Wednesdays in respect of calls / notices / fixed funds, commercial papers, certificates of deposits and repos in the corporate bond segment of the money market – from 9.00 a.m. to 5.00 p.m. – Market hours decided to reinstate. Also for Rupee interest rate derivatives.

Das said, “As part of our gradual move towards normal liquidity operations, we have extended call/notice/fixed money, commercial paper, certificate of deposits and repos in corporate – from 9.00 am to 5.00 pm – It has been decided to restore the market hours in the bond segment of money market as well as rupee interest rate derivatives.”

“The extension of time for HTM classification of fresh bank investments in bonds till March 2024 paves the way for stability in the bond market/financial sector and future government borrowings. Overall pragmatic revision of monetary policy by RBI in view of uncertainties and volatility on both domestic and international fronts, said Divam Sharma, co-founder, Green Portfolio.

Meanwhile, the Monetary Policy Committee of the RBI on Wednesday raised the repo rate by 35 basis points (bps) to 6.25 per cent with immediate effect, making loans costlier. The policy rate is now at the highest level since August 2018. RBI has maintained the policy stance on ‘withdrawal of accommodation’.

The RBI on Wednesday reduced the FY23 GDP growth forecast to 6.8 per cent from 7 per cent. The central bank, however, retained its retail inflation forecast for FY23 at 6.7 per cent.

Also, both the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates have also been increased by 35 basis points each to 6.00 per cent and 6.50 per cent, respectively. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.

The bank rate has also increased from 6.15 per cent to 6.5 per cent now.

This is the fifth consecutive increase in the repo rate this year. With this latest hike, the rate-setting panel of the RBI has raised the key policy rate by a total of 225 basis points this year to control inflation. Repo rate is the interest rate at which RBI lends to commercial banks.

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