Newly appointed Reserve Bank of India Governor Sanjay Malhotra called for banks to actively lend to other banks in the call money market. Currently, lenders are just passively parking their money with the central bank, he said.
“We urge the banks to actively trade among themselves in the uncollateratised call money market to make it deeper and vibrant for better signal extraction from the weighted average call money rate,” the RBI governor said in his monetary policy statement.
Jaideep Iyer, head of strategy at RBL Bank, does not see call money as a big issue from the banking sector’s standpoint. “Generally, we see very little demand for call money between banks,” he told NDTV Profit. The call money market has shrunk significantly over the last few years, he pointed out.
Lenders associate the call money market with a “negative liquidity scenario” on a bank-specific level and thus tend to avoid it, Iyer said.
The RBI Monetary Policy Committee, led by Malhotra, cut the benchmark repo rate by 25 basis points, while maintaining its neutral stance. This is the first time in two years that the MPC has changed the benchmark lending rate and the first time in five years that rates have been cut.
After the review, the MPC decided the following on lending rates:
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To cut the repo rate by 25 basis points to 6.25% unanimously.
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The standing deposit facility rate, pegged 25 basis points below the repo rate, is at 6.0%.
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The marginal standing facility rate, which is 25 basis points above the repo rate, is 6.5%.
. Read more on Economy & Finance by NDTV Profit.The RBI urged banks to trade among themselves in the uncollateratised call money market to make it deeper and vibrant. Read MoreEconomy & Finance, Business, Notifications
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