Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank is not doing the kind of active interest rate determination it sought to do last year during the Covid-19 period.

Market determines rates

Das emphasised that where the 7-day or 14-day or 28-day reverse repo auctions are concerned, RBI is now letting the market determine interest rates.

“So we are not, sort of, doing the kind of active interest rate determination we sought to do last year, mainly through the Government Securities (G-Sec) Acquisition Programme/ G-SAP. So, this has brought lot of orderliness into the market,” the Governor said in an interaction with a financial daily.

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Even in the G-Sec segment, RBI is letting the market to determine the rates.

“That doesn’t mean that we will allow interest rates to suddenly go up very steeply. But, by and large, the market evolution of the interest rates, even in G-Sec markets, seems to be quite orderly,” underscored Das.

Rates balance out

The Governor explained that while G-Sec yields did go up in between (for example, yield on the 10-year benchmark security went up to about 6.39 per cent), it has again come down (to 6.30 per cent, 6.31 per cent, 6.32 per cent levels).

Hence, Das felt that the market has accepted the reality and perhaps there is greater synergy between the RBI’s expectations and the market’s behaviour.