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Analysts at Standard Chartered offer their views on the Reserve Bank of India’s (RBI) unconventional policy path.

Key Quotes:

“The Reserve Bank of India (RBI) concluded the first tranche of its long-term repo operations (LTROs) on 17 February. To recall, the RBI announced that it would conduct INR 1tn of LTROs at a fixed rate of 5.15% (the current repo rate) in 1Y and 3Y tenors at its 6 February monetary policy meeting.

To this end, INR 250bn of 3Y LTROs were conducted on 17 February and garnered significant interest. The RBI received bids worth INR 1.9tn for the notified amount of INR 250bn, implying a bid-to-cover ratio of 7.77.

Likelihood of further LTROs amid ample liquidity to keep WACR closer to reverse repo than repo rate.

LTROs likely to positively impact money and debt markets; impact on lending rate, credit to be limited.”