According to the Reserve Bank of India (RBI), the higher government borrowings resulting the higher bond yields might upset the private sector. The reason behind the RBI’s statement is that the higher bond yields had militated against the low interest regime required to encourage private sector investments.
This is the first statement from the central bank accepting the adverse impact of such borrowings.
The yield on the 10-year government paper has moved up from 6.81 per cent on the eve of the Union Budget, announced earlier this month, to 6.94 per cent at the close of trading on 28th July.
However, the central bank maintained that various tools available with it in the form of open market operations (OMOs) and redemption of market stabilization scheme (MSS) bonds have ensured adequate liquidity in the banking system.
Meanwhile, the central bank also stated that it has enough headroom to ensure that the borrowing programme was carried out easily.
This is the first statement from the central bank accepting the adverse impact of such borrowings.
The yield on the 10-year government paper has moved up from 6.81 per cent on the eve of the Union Budget, announced earlier this month, to 6.94 per cent at the close of trading on 28th July.
However, the central bank maintained that various tools available with it in the form of open market operations (OMOs) and redemption of market stabilization scheme (MSS) bonds have ensured adequate liquidity in the banking system.
Meanwhile, the central bank also stated that it has enough headroom to ensure that the borrowing programme was carried out easily.
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