Monetary Measures Lack Developmental Focus

MONEY MARKET REVIEWEconomic & Political Weekly EPW november 22, 200825Piyusha Hukeri drafted the initial note and V P Prasanth, Rema K Nair and Anita B Shetty compiled the accompanying tables and graphs.Monetary Measures Lack Developmental FocusEPW Research FoundationThe financial crisis should give the Reserve Bank of India an opportunity to do some soul-searching about its delivery of credit. Over the years, the layers of money market transactions indulged in by low deposit-based foreign and new private sector banks have determined the interest rate structure and thus distorted the structure for the real economy, which is where the larger crisis is taking place. This distortion has been prompted by the RBI’s policy of non-interference in the prime lending rate system. In the accompanying neglect of agriculture, artisanal and small-scale industry, the interest rate charged has been higher at times than the average rate for the system as a whole. It is clear that a calibrated set of central bank guidelines with rigorous enforcement is necessary to realise social goals in credit policy prescriptions, along with a strengthening of banking institutions and the establishment of a rational interest rate structure. The global financial distress and its repercussions on the Indian finan-cial markets – current and prospec-tive – have attracted mind-boggling sets of decisions by the authorities. Never has there been in the history of the Reserve Bank of India (RBI) so concerted an attempt to augment liquidity in the financial system on such a large scale and in such quick suc-cession. The release of about Rs 140,000 crore liquidity by slashing 350 basis points of the cash reserve ratio (CRR) within the space of three to four weeks, the simultane-ous release of additional liquidity support to the extent of 1.50% of demand and time liabilities (DTL), equivalent to Rs 60,000 crore, to be used exclusively by the banks for funding the requirements of mutual funds (MFs) and non-banking finance com-panies (NBFCs), and the reductions in the repo rate from 9% to 7.50%, are all historic measures in line with the scale of the havoc wrought by the financial crisis. In response to the depletion in foreign exchange reserves, interest rates offered on foreign currency deposits have been raised and the rules regarding external commercial bor-rowings have been liberalised. With the need for sterilisation of foreign exchange inflows disappearing, the government has decided to buyback the securities issued under the market stabilisation scheme (MSS) as a measure to further inject liquid-ity and that too on a long-term basis. Besides, as a counter-cyclical prudential measure, the dynamic provisioning require-ments have been activated and all types of standard assets will now attract a uniform 0.40% provisioning, substantially reduced from 1% to 2%. The low rate of 0.25% for agriculture and SME sectors will continue. 1 Need for Soul-SearchingIn the conventional monetary policy framework, the authorities’ response to the crisis and the series of measures taken thereunder cannot be faulted. But the greatest drawback lies in believing that the conventional measures will do the trick in the current unprecedented crisis. In turn, this belief arises from the lack of realisation that the entire economic edifice built on the monetarist policy framework combined with a policy of fiscal compres-sion can only be weak and can be unsettled with the slightest of external shocks. Criti-cally viewed in this light, there can be strong misgivings regarding the objectives of the measures taken, their nature and sequencing. The objective seems to be to inject vast amounts of short-term money market liquidity, without ensuring its end-use. This attitude is in no way different from US President George Bush’s assertion on the eve of the recent G-20 summit that there is nothing wrong with free market capitalism and minimal regulations. And even theRBI measures have come about not as a studied response on its own voli-tion, but based on promptings by the gov-ernmental authorities. Instead, the present crisis should give the central banking authority an opportunity – and need – to do some soul-searching. There are many elements involved in such inward-looking exercise necessary for the RBI.First, it is necessary to realise that deep-down, the current economic malaise – the crisis in the Indian financial sector – is peripheral; the deeper crisis is to be found in the rapid deterioration in the growth of the real sector. The projected 7 to 8% growth in overall GDP during 2008-09 with support from the services sector hides the problems of crisis proportions faced by the real sector. More specifically, the deterioration in recent industrial growth is to be traced to theRBI’s knee-jerk and sledge-hammer methods of fight-ing inflation based as they were on the generally-discredited monetarist policies. In this respect, it is worth recalling that the rate of industrial growth had begun to falter right from the beginning of the cur-rent financial year, much before the exac-erbation of the global financial crisis man-ifested in the bankruptcy, sell-out and restructuring of some of the world’s largest financial institutions that occurred in mid-September 2008. The adverse consequences

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MONEY MARKET REVIEWEconomic & Political Weekly EPW november 22, 200827Table 3: Weighted Averages of Daily Call/Notice Rates in Per Cent Per Annum: Simple Statistical Characteristics Month/Week Simple Standard Coefficientof Simple Standard Coefficientof Mean*DeviationVariation Mean* Deviation Variation (in %)$ (in %)$ Call Money Notice Money **September2008 All four weeks 9.98 1.76 17.61 8.04 4.10 50.98 26 (RF)* 11.32 1.7415.41 7.556.0079.54 19 11.00 1.3612.38 10.26 1.97 19.23 12(RF)* 8.351.1113.246.973.5150.44 5 9.090.333.647.264.1056.51 October2008 All five weeks 10.21 3.86 37.79 7.98 5.92 74.21 31 11.77 4.2436.02 9.317.6181.77 24(RF)* 5.800.9816.93 3.79 3.4891.61 17 8.811.6018.146.533.4152.21 10(RF)* 11.84 3.9233.12 11.12 7.2565.23 3 14.25 2.09 14.69 10.11 6.8467.63** Separate reportings began on March 15, 2005. * Including data for reporting Fridays (RF). $ Based on original unrounded figures.Source: RBI.Table 2: Bank Group-wise Lending to Real Estate and Other Sensitive Sectors (Amount in Rupees crore) Public Sector Banks All Scheduled Commercial BanksAdvances to 2005-06 2006-07 Percentage 2005-06 2006-07 Percentage IncreaseIncreaseCapital market $ 13,470 19,093 41.7 22,303 30,637 37.4 (1.2)(1.3)(1.5)(1.6) Real estate * 158,033 217,979 37.9 262,054 370,690 41.5 (14.3)(15.1)(17.3)(18.7) Commodities 1,227 1,695 38.11,414 2,207 56.1 (0.1) (0.1) (0.1) (0.1) Total advances to 172,731 238,767 38.2 285,771 403,534 41.2 sensitivesectors (15.6) (16.6) (18.8) (20.4) $ - Exposure to capital market is inclusive of both investments and advances.* -Exposure to real estate sector is inclusive of both direct and indirect lending.Figures in brackets are percentages to total loans and advances of the concerned bank-group.Source: RBI, Report on Trend and Progress of Banking in India, 2006-07, p 302.Table 4: Comparison of Call, Overnight CBLO and Repo RatesWeek Ending Weighted Average Rates (in %) Daily Average Volumes (Rs Crore) Call Overnight CBLO Repo Call Overnight CBLO Repo 5-Sep-08 9.158.878.9613,61026,47911,28312-Sep-08 8.65 8.02 8.1014,397 27,13812,52719-Sep-08 11.62 9.21 9.3015,860 15,159 8,81326-Sep-08 12.35 8.92 9.16 9,642 15,902 9,5423-Oct-08 15.50 11.15 10.73 12,980 11,197 9,73910-Oct-08 12.48 9.85 9.9715,204 11,697 9,79017-Oct-08 8.79 7.65 7.9117,171 18,265 8,33124-Oct-08 6.27 5.03 5.9613,429 20,08712,03231-Oct-08 13.21 8.55 9.4415,945 17,899 7,011Source: Clearing Corporation of India (CCIL).in the years 2005-06 and 2006-07 when theRBI went to town with the declaration that “as banking services are in the nature of public good, it is essential that availabil-ity of banking and payment services to the entire population without discrimination is the prime objective of the public policy” (V Leeladhar, “Taking Banking Services to the Common Man – Financial Inclusion”,RBI Bulletin, January 2006), the banks hardly observed any of the credit guidelines for the real and neglected sectors including those for opening general credit lines for the weaker sections or the need for expand-ing branch network in rural areas, but instead extended unprecedented levels of bank credit for real estate, capital market and commodity market operators (Table 2). It may appear odd but it is true that the outstandings of loans of public sector banks against real estate (including housing loans) at the end of March 2007 (at Rs 217,979 crore) have far exceeded their loans against agriculture, both direct and indirect together (Rs 205,091 crore).The sum total of the argument here is that a calibrated set of central bank guide-lines with rigorous enforcement are nec-essary to realise social goals in credit policy prescriptions, along with a strengthening of banking institutions and the establish-ment of a rational interest rate structure. When public pressures are brought to bear on the government to desist from diluting the independence of the central bank as has been attempted in an editorial note in this journal (“Where Is the Reserve Bank of India?”, 15 November 2008), the case against such governmental interference becomes stronger if the central bank ensures the necessary developmental role for institutional credit and above all exhib-its a reasonable degree of social concern for an egalitarian pattern of credit distri-bution and economic development.2 Money, Gilt-Edged and Forex MarketsWith further deepening of the unprece-dentedUS financial crisis and its contagion spreading across the global markets, the Indian financial markets too have suffered the spillover effects, exacerbating the weaknesses of liquidity in the money and forex markets and therefore attracting a large number of central banking measures essentially to infuse additional liquidity. There were three major factors which have influenced the Indian markets. First, against the backdrop of heightened uncer-tainty and freezing of inter-bank markets in theUS and Europe, there was an acute dollar shortage in overseas markets, which adversely affected the domestic banks with overseas operations. Second, this situation of a dollar shortage was further compli-cated by the massive RBI intervention in the forex market to arrest rupee depreciation, thereby contracting rupee liquidity. Finally, the already precari-ous liquidity situation brought about by the stringent monetary tightening policy pursued in the recent past deteriorated further as liquidity came under tremen-dous pressure. Consequently, Oct-ober began with the rupee depreciating sharply, call rates jumping to over 20% in intra-day trades and the liquidity support through LAF repo rising to over a colossal Rs 90,000 crore per day, which was also insufficient to stabilise the mar-kets. In response, the RBI reducedCRR by 250 basis points in October thus injecting a substantial amount of Rs 100,000 crore. Along with theauc-tions in November, there has been 350 basis points reduc-tions inCRR (or worth Rs 140,000 crore) thereby nul-lifying the effect of 400 basis points hike in it that was brought about between Dec-ember 2006 and August 2008 impo-unding Rs 132,250 crore. Besides, as mentioned earlier, the RBI increased interest rates offered on non-resi-dent deposits as well as allowed banks to borrow funds from overseas branches and for the first time, the RBI extended credit lines for mutual funds under a special repo. The RBI governor assured the market about the strong fundamentals of the economy and the banking system and also said that the forex and money markets were function-ing in an orderly manner. The Securities and Exchange Board of India (SEBI) too removed the restrictions imposed on participatory

MONEY MARKET REVIEWnovember 22, 2008 EPW Economic & Political Weekly28Table 5: Auctions of 91-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)2007 October 3 3,500.00 92 5,383.00 78 3,500.00 0.00 98.25 7.14 59,853.00 (2) (4,000.00) (2)(4,000.00) [98.28] [7.02] October10 3,500.00 115 13,193.00 30 3,500.00 0.00 98.29 6.98 62,303.00 (2) (1,200.00) (2) (1,200.00) [98.29] [6.98] October17 3,500.00 119 7,672.50 65 3,500.00 0.00 98.26 7.10 64,403.00 (3) (1,100.00) (3) (1,100.00) [98.27] [7.06] October24 3,500.00 109 7,803.33 59 3,500.00 0.00 98.28 7.02 66,003.00 (1) (100.00) (1) (100.00) [98.29] [6.98] October31 3,500.00 86 3,701.78 28 500.00 0.00 98.21 7.31 64,684.00 (3) (380.99) (3) (380.99) [98.22] [7.27]2008 October1 5,000 108 7,752.00 9 500.00 0.00 97.84 8.86 59,706.00 (1) (500.00) (1) (500.00) [97.84] [8.86] October 8 5,000 146 9,520.27 93 5,000.00 0.00 97.93 8.48 60,606.00 (6) (4,836.00) (6)(4,836.00) [98.01] [8.14] October15 5,000 135 9,103.80 88 5,000.00 0.00 97.88 8.69 62,356.00 (3) (2,000.00) (3)(2,000.00) [97.96] [8.35] October22 5,000 168 13,426.53 28 5,000.00 0.00 98.24 7.19 64,606.00 (1) (1,000.00) (1)(1,000.00) [98.27] [7.06] October 29 5,000 156 8,835.26 104 5,000.00 0.00 98.18 7.44 67,206.00 (2) (1,400.00) (2) (1,400.00) [98.22] [7.27] Figures in parentheses in cols 3 to 6 represent numbers and amounts of non-competitive bids which are not included in the total. Figures in the square brackets under cols 8 and 9 represent weighted average price and respective yield. Table 6: Auctions of 182-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue2007 October3 2,500.00 71 4,990.00 48 2,500.00 0.00 96.48 7.32 31,141.00 (0) (0.00) (0) (0.00) [96.51] [7.25] October17 2,500.00 97 4,815.00 78 2,500.00 0.00 96.42 7.45 32,117.00 (1) (500.00) (1) (500.00) [96.46] [7.36] October31 2,500.00 75 3,165.00 18 500.00 0.00 96.36 7.58 30,991.00 (0) (0.00) (0) (0.00) [96.37] [7.55] 2008 October1 2,000.00 76 3,252.00 10 500.00 0.00 95.70 9.01 24,303.00 (1) (175.00) (1) (175.00) [95.71] [8.99] October15 2,000.00128 4,592.47 64 2,000.00 0.00 95.85 8.68 24,303.00 (0) (0.00) (0) (0.00) [95.92] [8.53] October29 2,000.00146 6,649.00 32 2,000.00 0.00 96.45 7.38 24,553.00 (0) (0.00) (0) (0.00) [96.47] [7.34]Figures in the square brackets represent weighted average price and the respective yield. Figures in brackets represent numbers and amounts of non-competitive bids which are not included in the total.Table 7: Auctions of 364-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue2007 October 10 3,000.00 154 11,231.50 31 3,000.00 0.00 93.15 7.37 58,301 (0) (0.00) (0) (0.00) [93.19] [7.33] October24 3,000.00 124 8,141.00 35 3,000.00 0.00 93.16 7.36 60,040 (1) (24.00) (1) (24.00) [93.18] [7.34] 2008 October8 2,000.00 131 7,344.00 38 2,000.00 0.00 92.23 8.45 54,041 (0) (0.00) (0) (0.00) [92.28] [8.39] October 22 2,000.00 152 8,652.50 13 2,000.00 0.00 93.13 7.40 53,049 (1) (32.00) (1) (32.00) [93.17] [7.35]Figures in the square brackets represent weighted average price and the respective yield. Figures in brackets represent numbers and amounts of non-competitive bids which are not included in the total.notes (PNs) issued by foreign institutional investors (FIIs). Further, the government formed a panel headed by the secretary in the Ministry of Finance to study the meas-ures to ease liquidity. Even the first dated securities auction was cancelled to instill confidence in the market that the regulators were prepared to take the required actions. Simultaneously, the government agreed to release the first tranche amounting to Rs 25,000 crore of a farm loan waiver, dou-bled the FII investment limit in corporate bonds and expressed a willingness to sup-port bank capitalisation. Due to the intensifi-cation of the financial crisis, there was har-monisation of a number of central bankers in reducing benchmark rates. In response to the above measure, the short-term money market rates were stabi-lised by the end of October. But, as most of the other internal and external sources of funds were drying up for the real sector borrowers, they began to rely mainly on banks, which pushed the monthly non-food credit offtake to an unprecedented level of Rs 102,760 crore despite the banks turning cautious due to liquidity pressure. Consequently, theRBI eased the restric-tions on external commercial borrowings (ECB) on 22 October. However, in the mid-term review of credit policy on 24 October, the RBI took no action in any of the mone-tary measures much to the disappointment of the market. But with sustained pressure on the rupee, weakening of stock indices and increased prospects of a slowdown, the RBI embarked on yet another set of massive policy measures on 1 November: a repo rate cut by 50 basis points and a slashing of the CRR and SLR by 100 basis points each. Fur-ther, credit lines were extended to mutual funds as well as NBFCs and the RBI announced a buyback scheme for the secu-rities issued under MSS. 2.1 Call Money Market With the ebb and flow of liquidity, the vola-tility of call money rates, as measured by the standard deviation, jumped to 3.86 during October (Table 3, p 27). The daily average call rates oscillated between a peak of 18.53% when the liquidity was in deficit and a low of 4.16% following massive injec-tion through repo and CRR inflows. In the holiday-shortened fortnight end-ing 10 October, the weighted average of call rates ruled firm and touched a peak of 16.51% on 1 October and thereafter eased marginally due to huge liquidity infusions through the repo window. The overnight rate again pierced through the earlier peak and touched 18.53% on 10 October,

49 47 45 43 41 39

	(Daily) Working
	Days Oct 2008
(Monthly Averages) (Jan 2001 to Sept 2008)

MONEY MARKET REVIEWnovember 22, 2008 EPW Economic & Political Weekly30Appendix Table: Secondary Market Operations in Government Papers: NDS and NDS-OM Deals(Amount in rupees crore) Descriptions Week Ending October 2008: Yield to Maturity on Actual Trading Total for the Month 31 24 17 10 3 of October 2008 AMT YTM CY AMT YTM CY AMT YTM CY AMT YTM CYAMT YTM CYAMT YTM CY1TreasuryBills A91-DayBills1562.567.16 1527.386.97 1297.727.82 1235.228.05 792.078.65 6414.957.60 B 182-Day Bills 223.21 7.26 443.06 7.10 626.65 6.56 197.37 8.01 216.89 8.81 1707.18 7.25 C 364-Day Bills 405.45 7.20 1860.64 7.01 856.10 7.84 267.13 8.76 0.60 8.65 3389.92 7.38 2 GOI DatedSecurities A Regular (%: Year)5.48, 2009 280 7.34 5.542174.597 7.19 5.54 1098 7.74 5.56 1565 7.89 5.57190.245 8.72 5.605307.84 7.57 5.55 6.65, 2009 477 7.27 6.67 1705 7.31 6.67 183.22 7.83 6.69 225 8.27 6.70 106 8.8493 6.72 2696.22 7.48 6.67 6.96, 2009 OMC SB ---------25 9.3022 7.03 ---25.00 9.30 7.03 7.07 , 2009 OMC SB ------10 9.4593 7.14 ---10 9.9311 7.16 20.00 9.70 7.15 7.33 , 2009 OMC SB ---------45 9.21 7.38 40 9.92 7.41 85.00 9.54 7.39 7.33,2009OIL MKT BONDS------138.937.38 659.207.38 ---78.00 9.167.38 7.99,2009OIL MKT BONDS ------307 8.988.04 ------307.008.988.04 5.87 , 2010 395 7.31 5.97 1470.3 7.38 5.97 1690 7.92 6.01 775 8.06 6.02 189.609 8.75 6.07 4519.91 7.75 6.006.20, 2010UTISB ------109.4 6.45 ------10.00 9.406.457.55, 2010 5 7.54657.55186.02 7.417.54 ---------191.02 7.42 7.54 11.30, 2010 20 7.6501 10.68 50.3 7.52 10.65 0.33 8.08 10.74 11.159 8.15 10.75 ---81.79 7.64 10.6711.50, 2010 507.9310.92 380 7.4410.84 400 8.07 10.94 ------830.007.7710.8912.25, 2010 ------35.03 7.7611.45 808.4811.56 ---115.03 8.26 11.5312.25, 2010 107.648811.44 157.45 11.40 ---------25.00 7.53 11.42 6.57,2011 40 7.38 6.68 1155 7.40 6.69 385.12 7.79 6.75 125 8.04 6.78 - - - 1705.12 7.54 6.71 9.39 , 2011 55 7.6313 9.01 70 7.43 8.97 35.21 7.75 9.04 35 8.29 9.15 ---195.21 7.70 9.0311.50, 2011 157.593610.50 500 7.4810.46 4758.0610.61 ------990.007.7610.5312.00, 2011 950 7.5510.75 ------------950.007.5510.756.85, 2012 ---207.587.00 ---------20.007.587.00 7.40,2012 10.1 7.56 7.44 0.2 7.60 7.45 0.85 8.02 7.54 0.13 7.9991 7.54 0.26 8.46 7.65 11.54 7.62 7.4510.25, 2012 ---5.978 7.78 9.53 ---------5.987.78 9.53 7.27 , 2013 121.6 7.52 7.34 78.4 7.61 7.37 ---85.5 8.16 7.54 140.4 8.56 7.66 425.90 8.01 7.499.81, 2013 5 7.4992 9.02 ------758.259.26 ---80.00 8.209.25 12.40, 2013 35.11 7.83 10.51 125 7.77 10.48 1.45 7.7621 10.47 ---0.05 8.5222 10.76 161.61 7.78 10.49 7.37,2014 255 7.61 7.45 100 7.68 7.47 295.1 7.97 7.57 100 8.3686 7.71 350 8.70 7.82 1100.10 8.13 7.627.56, 2014 240 7.53 7.55 ------------240.007.53 7.55 7.38,2015 265 7.57 7.45 245.7 7.70 7.51 191.587 7.95 7.61 184 8.15 7.69 - - - 886.29 7.81 7.5510.47,2015 ------158.2002 9.43 ------15.00 8.209.437.59,2016 10.57.637.61310.57.737.65187.67.917.73908.017.77 ---598.607.827.69 7.49,2017 681.71 7.67 7.57 850.758 7.75 7.61 137 7.93 7.70 23 8.11 7.78 80 8.6305 8.04 1772.47 7.78 7.63 7.99, 2017 486 7.65 7.82 397 7.65 7.82 172.727 8.01 8.00 850 8.10 8.04 10 8.6908 8.35 1915.73 7.88 7.94 8.07 , 2017 20 7.62 7.86 87 7.73 7.91 15.58 8.09 8.08 ---0.01 8.9329 8.49 122.59 7.76 7.925.69, 2018 ---7 7.766.636.6 8.236.86165 8.02 6.75 ---178.608.016.75 6.25, 2018 28 7.79 6.94 25.7 7.82 6.96 27 8.08 7.08 2 7.85 6.97 ---82.70 7.89 6.99 8.24,2018 13357.51 7.53 7.8713553.55 7.59 7.90 22129.69 7.77 7.99 18531.66 7.98 8.1010188.26 8.45 8.3677760.68 7.84 8.0310.45, 2018 ---107.9 8.94 ---------10.00 7.908.945.64, 2019 ---2 7.956.71 8 8.246.86 ------10.00 8.186.83 7.94,2021 2305.076 7.74 7.823981.724 7.81 7.86 4670.39 8.14 8.06 5543.4 8.40 8.233880.235 8.94 8.5920380.83 8.25 8.148.13, 2021OMC SB---3.1 9.188.8310.25 9.158.81 ------13.35 9.168.815.87 , 2022 ---0.5 8.14297.22 5 8.32 7.33 ------5.508.30 7.32 8.15 , 2022 FCI SB 45.94 9.29 8.94 745.91 9.55 9.12 232.44 9.38 9.00 293.72 9.64 9.19 13.97 9.53 9.12 1331.98 9.53 9.118.20, 2022 245 7.847.97 255 7.92 8.02 75.3238.138.16 ------575.327.918.018.35 , 2022 ---1 7.92328.07 4.1 8.168.22 ---0.008 9.63469.245.118.128.206.17, 2023 ---6 7.907.25------0.02 8.76847.836.02 7.907.25 8.30, 2023 FERT SB 27.85 9.41 9.11 100.08 9.45 9.14 18.72 9.43 9.13 0.3 9.452 9.14 1.37 9.13 8.91 148.32 9.44 9.13 8.03, 2024 FCI SB 9.82 9.36 9.02 146.71 9.56 9.17 71.15 9.41 9.06 160.89 9.59 9.20 23.93 9.56 9.18 412.50 9.54 9.16 7.95 , 2026 FERT SB 6.96 9.31 9.00 67.865 9.38 9.05 863.57 9.49 9.14 202.92 9.54 9.18 5 9.6357 9.25 1146.32 9.49 9.14 8.24,2027 485 8.00 8.06 775.2 8.06 8.10 916 8.30 8.29 778.52 8.43 8.39116.565 8.998.833071.29 8.25 8.25 6.01,2028 1.35 8.0999 7.54 4.75 8.28 7.68 3.75 8.37 7.75 2 8.70 8.00 0.5 10.3402 9.39 12.35 8.44 7.81 7.95,2032 1606.5 8.03 8.02 1997.4 8.12 8.10 809.65 8.29 8.24 1285.45 8.43 8.35 247.4 9.18 9.02 5946.40 8.23 8.19 8.28,2032 500 8.05 8.09 490 8.12 8.14 591.995 8.32 8.32 1447.3 8.54 8.50 1347.6 9.17 9.05 4376.90 8.60 8.567.50, 2034 108.08348.0070.05 8.158.06275.125 8.408.28 ------355.188.34 8.238.33,2036 524.58.088.101438.58.228.232178.358.35 108.308.31 ---2190.008.208.21 Sub-total 23584.21 7.63 7.92 33623.30 7.71 7.70 36598.70 7.95 7.94 32783.10 8.15 7.99 16943.45 8.66 8.39 143532.75 7.97 7.94 B RBI’s OMO: Sales 8.00 - - 241.00 - - 200.00 - - 12 - - 176 - - 637.00 - -Purchase ---244.00 --195.00 --14 --175 --628.00 --Sub-total 8.00--485.00 --395.00 --26.00 --351.00 --1265.00 -- (A+B) 23592.21 7.63 7.92 34108.30 7.71 7.70 36993.70 7.95 7.94 32809.10 8.15 7.99 17294.45 8.66 8.39 144797.75 7.97 7.943 MarketRepo 28853.65 60566.23 52446.90 49789.31 35217.25 226873.34 4 State Govt Securities 119.46 7.98 8.06 457.43 8.00 8.05 757.27 8.13 8.39 198.12 8.39 9.15 15.09 8.64 8.99 1547.37 8.12 8.37 Grand total (1 to 4) 54756.54 98963.04 92978.34 84496.25 53536.35 384730.51 (-) means no trading. YTM = Yield to maturity in percentage per annum. CY = Current yield in per cent per annum. SGL = (RBI’s) Subsidiary General Ledger. OMO = Open Market Operations. OMC SB= Oil Marketing Companies Special Bonds . NDS = Negotiated Dealing System. OM = Order Matching Segment. Securities with small-size transactions (Rs 5 crore or less) have been dropped from the above list but included in the respective totals. (1) Yields are weighted yields, weighted by the amounts of each transaction. (2) Current yield has not been worked out for treasury bills. (3) For Floating Rate Bonds (FRB’s) Current yields are based on the latest half-year yield determined in the auction.at 2.6 during April-September 2008-09 was almost the same as a year ago.Following the spot dollar shortages, the forward premia, across maturity, were ruling at a discount. However, with the narrowing of interest differentials coming behind the increases in the external rupee and foreign currency deposits and declines in the repo rate, the premia firmed up. However, the one-month premia ruled above the three and six-month rates implying that the market expected that the rupee would not depreciate much in the long-term as compared with the short duration period (Graph C, p 31).3 PrimaryMarketsIt is interesting that despite liquidity short-ages, yields offered in the primary

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