DBS Economics India: improving liquidity management

Besides the 25bp rate cut, what mattered more were measures introduced to increase flexibility in liquidity management in early-April.

This will allow the RBI to meet the durable liquidity needs of the economy while keeping short-term liquidity conditions consistent with the monetary stance.

The RBI's more active role in managing liquidity should keep the o/n interbank rate within the 6-7% policy corridor, close to the repo rate.

- Some of the measures were misinterpreted as QE. We don't agree.

- On rates, our end-2016 2Y and 10Y INgov yield forecasts have been lowered by 20bps each to 7.0% and 7.4% respectively.

Source : Equity Bulls

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