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Retailing to widen G-sec market: RBI
January 16, 2003 13:39 IST
Reserve Bank of India said on Thursday that the bank will continue with its soft interest rate bias and the entry of retail investors in government securities market will not affect the yields but broaden the debt market.
"Soft interest rate regime was announced by the RBI Governor in April and October monetary policies. The stance continues," RBI Deputy Governor Rakesh Mohan said after the launch of retail trading in G-secs in New Delhi.
The statement assumes importance as RBI had reduced bank rate to a 29-year low at 6.25 per cent in October last.
Mohan said the entry of retail investors in G-secs would broaden the debt market, although it would not have any impact on the yields of these instruments.
"I don't think that entry of retail investors has much to do with yield rates to move upward or downward," he said.
Given the efficiency in the market and the number of players, Mohan said the markets would determine the interest rates.
The yields on G-secs would be market determined, he said, adding the RBI would adjust the rates according to the market expectations and mood.
On the liquidity in the markets, the RBI official said he was "neither comfortable nor uncomfortable."
He said the liquidity position had been easy in the last one year with the kind of foreign exchange inflows taking place. Forex reserves mounted to over 70 billion dollars in recent days.
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