The Reserve Bank of India (RBI), in its monetary policy on Friday, announced that it will conduct open market operations (OMOs) in state development loans (SDLs) to narrow the differential in their yields compared to those of government securities (G-Secs).
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SDLs are going through the roof at about 100 basis points (bps) right now, and hopefully that will come down, said Neeraj Gambhir, President, Head Treasury and Markets at Axis Bank in an interview to CNBC-TV18. He said this will have implications for the bond market as a whole.
A bit of fiscal stimulus was expected but the government has constraints, Gambhir said.
The RBI was stepping up in a big way to make sure that on the monetary front and on the interest rate front, things continued to be pro-growth he said.
On the RBI’s move to tweak the risk weights for housing loans, Gambhir said it was to be seen whether there was large ticket home loan demand.
Bank’s exposure to non-banking financial companies (NBFCs) have gone up significantly over the last six-nine months, he said.