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Paradigm Shift in Financial Policies: Need of the Hour

The unravelling of the global financial crisis sends a clear signal that India has to make fundamental changes in its management of the banking and financial sector. The first prerequisite is a return to relationship banking, the arrangement under which contacts between the lending bank manager and the borrower are direct and not impersonal. The immediate Indian response to the global crisis should be to work towards lowering interest rates which at their high level have hurt manufacturing investment in both the large- and small-scale sectors. The economy also needs the pursuit of an expansionary policy by waiving the fiscal rules.

MONEY MARKET REVIEWoctober 18, 2008 EPW Economic & Political Weekly22Piyusha Hukeri drafted the initial note and V P Prasanth, Rema K Nair and Anita B Shetty compiled the accompanying tables and graphs.Paradigm Shift in Financial Policies: Need of the HourEPW Research FoundationThe unravelling of the global financial crisis sends a clear signal that India has to make fundamental changes in its management of the banking and financial sector. The first pre-requisite is a return to relationship banking, the arrangement under which contacts between the lending bank manager and the borrower are direct and not impersonal. The immediate Indian response to the global crisis should be to work towards lowering interest rates which at their high level have hurt manufacturing investment in both the large-and small-scale sectors. The economy also needs the pursuit of an expansionary policy by waiving the fiscal rules.By now the genesis of the global financial crisis has been reasonably well unravelled. The crisis repre-sents the inevitable manifestation of a shaky financial architecture built on the basis of impersonal mass securitisation resulting in layers of financial products using complicated statistical models and nurturing varied types of non-bank insti-tutions outside the realm of banking laws and discipline but tempting and attracting banking institutions to a structure riddled with extreme form of risks. 1 RelationshipBanking: The Most Viable FoundationIn the collapse of the edifice like a pack of cards reflecting the contagion across the globe, the entire philosophy of free-market financial engineering and the associated set of institutions and instruments which have promoted it – central banking policies, Basel norms of capital adequacy and supervisory architecture, the complex system of securitisation including mortgage-based securities (MBSs) and collateralised debt obligations (CDOs) and the role of credit rating agencies – have all come into disrepute. There cannot be a second opin-ion on the need for concerted rethinking at the levels of philosophy and public poli-cies setting out the necessary checks and balances on the scope and scale of finan-cial engineering. The often repeated quin-tessential quote from Joseph E Stiglitz from more than a decade ago comes to mind: “...financial markets are markedly different from other markets; ...market failures are likely to be more pervasive in these markets; and ... there exist forms of government intervention that will not only make these markets function better but will also improve the performance ofthe economy” (p 20) (‘TheRoleofthe State in Financial Markets’inProceedings of the World Bank Annual Conferenceon Development Economics 1993). This should constitute the fundamental premise on which the future financial systems have to be calibrated in individual countries tak-ing into account their social and economic structures and current and prospective development goals, priorities and needs. In such a framework, globalisation as a goal for the financial systems has to be discarded as unworkable, though capital flows for productive purposes can be pro-moted based on the needs of individual systems. Against this background and against the backdrop of adverse repercus-sions that the Indian financial system has begun to sense, there ought to be funda-mental changes in this country’s approach to financial policies and the banking and financial sector management. The new thinking has to be consistently applied both in regard to the resolution of imme-diate fallout of the global turmoil and the fashioning of the long-term banking and financial superstructure.The foundation for such a long-term superstructure is to be found in commer-cial banking which is socially leveraged to access without limit public deposits and partakes of the benefits of multiple credit creation. For such a banking system to be able to serve the community at large in a safe and less risky environment, the essen-tial condition is one of promoting and nur-turing relationship banking – an arrange-ment in which contacts between lending bank manager and the borrower are direct and not impersonal unlike in the western banking system in which securitisation or credit-related derivatives have dominated. The latter have neither contributed to more efficient use of scarce resources nor reduced financial risks. In fact, the Nobel Prize winning theory of asymmetric infor-mation, and the consequential adverse selection and moral hazard behaviour on the part of lenders and borrowers have proved to be, in retrospect, the bane of the western banking system; their operations have intensified financial risks and pushed them to the brink.In relationship banking, the relatively close banker-borrower contact obviates information asymmetry. It has another majoradvantage which is that it does not

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MONEY MARKET REVIEWoctober 18, 2008 EPW Economic & Political Weekly24Table 2: 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 **August2008 All five weeks 8.90 0.90 10.07 8.53 1.00 11.69 29(RF)* 8.591.4016.268.251.3216.02 22 9.450.222.369.260.434.61 14 9.070.252.719.010.677.44 8 9.190.131.388.570.526.06 1 (RF)* 8.201.1614.18 7.250.9012.37 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** Separate reportings began on March 15, 2005. * Including data for reporting Fridays (RF). $ Based on original unrounded figures.Source: RBI.of public ownership and social banking in operation despite the coterie amongst the powers-that-be has been pushing the sys-tem in the other direction.The country has a long history of trad-ing classes and speculation dominating the system. In this context and the context of the current crisis, another area of the Indian financial sector that calls for a fun-damental rethink on the part of the authorities concerns the capital market. The way the capital market instruments have been put in place and the way the capital market-centric fiscal and other public policies have been pursued by the authorities, have given rise to a situation of massive speculative activities without contributing admittedly to an efficient functioning of the market, including the failure to help mobilise fresh equity capital by many manufacturing and infrastruc-ture companies for their investment projects. The authorities dogged depend-ence on portfolio capital despite its desta-bilising character is evident from theSEBI’s relaxation of the curbs on participatory notes (PNs) notwithstanding the long-standing case made by theRBI against it. Treating such capital inflow as an answer to the banks’ immediate liquidity problem, is improper as it can be an extremely costly proposition. As it is, the economy enjoys a fairly high level of domestic saving, and as shown below, there are ready ways of addressing the problem. The share market-centric policy imposes a heavy constraint on pursuing independent macroeconomic policies on the plea that foreign invest-ment flow may suffer. In fact, this is a dis-torted view of the responses of foreign investors who are attracted by a stable environment of real economic growth.Within the existing capital market poli-cies, there is substantial scope for reforms and restraints. First, in the derivative seg-ments, short sales should be an exception rather than the rule. There have been occasions when groups of investors like foreign institutional investors (FIIs) have hammered down share prices by short sales. Secondly, as alluded to in the column last month (EPW, September 27, 2008), individual stock futures that dominate, and cash-settlements rather than delivery-settlements, which are the norm in deriva-tive segments in the Indian bourses, have reduced the Indian equity market into being amongst the most volatile in the world. In the interest of putting in place a healthy, stable and dependable capital market, it is necessary that some of these much needed reforms in the capital market are undertaken. The same is true of the system of currency futures on exchanges in which trading has been allowed for everyone without there being any under-lying exposure. A “dynamic” forex dealer can put together the names of 10 bank depositors satisfying know-your-customer (KYC) norms and trade in their name for protecting the value of their rupee in terms of US dollar, the currency in which contracts have been permitted for trading for the present. This is just not hypotheti-cal; we have the recent concrete experi-ence of such trading in respect of small and medium enterprises (SMEs) in theform of exotic derivatives and the banks as well asSMEs incurring heavy losses. Apart from these basic reforms in the management of the banking system, the authorities’ response to the immediate problem of adverse consequences of the global financial meltdown for the domes-tic economy has to be calibrated. First, it should not be treated purely as a short-term liquidity issue, which is basically an issue with foreign and new private sector banks, which have a relatively poor deposit base and which carry on layers of money market transactions. Instead, what is to be ensured is the normal credit flow essentially by other banks for productive sectors. For this purpose, there is a need to release the Rs 1,22,500 crore of bank liquidity impounded through CRR increases by 375 basis points between December 2006 and July 2008 in a gradual manner. (Of course, about Rs 60,000 crore have already been released.) Secondly, while impounded funds are being released in this man-ner, it is improper to let it be purely in favour of the short-term money market without ensuring some purposeful end-use of such funds. The RBI should go back to its old system of sector-specific refinance facilities, thus encour-aging banks to lend in favour of agricul-ture, small and micro enterprises, self-help groups (SHGs) and weakersections, which sufferthe maximum in such a credit-starved environment. Thirdly, there is a stronger case for reducing interest rates on bank loans which have gone up rather drastically and which have hurt manufac-turing investment and output activities to a significant extent during the past year or so. Finally, a more purposeful policy stance in the context of contractions in foreign currency assets and consequential reductions in liquidity, should be a coun-tervailing expansionary fiscal policy. The liquidity released above along with some unwinding of funds under the Market Stabilisation Scheme could be fruitfully utilised by the government for giving a push to a number of infrastructure projects in public sector or those under public-private partnerships whichare held under the restrictive rules of the Fiscal Responsibilityand Budget Management (FRBM) rules. In the currentscenario of sluggish manufacturing activity, the FRBM rules regarding fiscal and revenue deficit targets deserve to be waived and an expansionary fiscal policy pursued. The fear of inflation has been considerably obviated by significant declines in com-modity prices including crude oil prices. In any case, the drastic fall in industrial
MONEY MARKET REVIEWEconomic & Political Weekly EPW october 18, 200825Table 3: Auctions of 91-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPrice Yeild Outstanding 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 September 5 3,500.00 101 7,985.00 50 3,500.00 0.00 98.27 7.06 69,703.00 (2) (2,100.00) (2) (2,100.00) [98.28] [7.02] September123,500.00 106 8,870.92 49 3,500.00 0.00 98.26 7.10 69,403.00 (4) (4,300.00) (4)(4,300.00) [98.27] [7.06] September193,500.00 85 7,838.25 30 3,500.00 0.00 98.29 6.98 65,053.00 (3) (7,100.00) (3)(7,100.00) [98.30] [6.94] September263,500.00 81 4,255.14 68 3,500.00 0.00 98.24 7.19 59,953.00 (1) (1,000.00) (1)(1,000.00) [98.26] [7.10] 2008 September 2 5,000 109 11,692.25 57 5,000.00 0.00 97.80 9.02 57,012.00 (1) (1,000.00) (1)(1,000.00) [97.81] [8.98] September 10 5,000 148 13,638.73 59 5,000.00 0.00 97.87 8.73 62,398.00 (6) (4,836.00) (6)(4,836.00) [97.88] [8.69] September17 5,000 138 10,967.30 66 5,000.00 0.00 97.89 8.65 65,256.00 (2) (573.48) (2) (573.48) [97.90] [8.60] September 24 500 57 2,493.14 15 500.00 0.00 97.91 8.56 59,956.00 (1) (3.50) (1) (3.50) [97.96] [8.35] 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 4: 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 September52,500.00104 4,573.00 61 2,500.00 0.00 96.44 7.40 28,496.44 (1) (855.00) (1) (855.00) [96.46] [7.36] September192,500.00102 9,980.00 38 2,500.00 0.00 96.51 7.25 30,141.44 (0) (0.00) (0) (0.00) [96.52] [7.23] 2008 September22,500.00 96 8,519.50 17 2,500.00 0.00 95.67 9.08 23,828.00 (0) (0.00) (0) (0.00) [95.68] [9.05] September172,000.00 94 5,328.50 31 2,000.00 0.00 95.81 8.77 24,128.00 (0) (0.00) (0) (0.00) [95.83] [8.73]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 5: 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 September123,000.00 133 11,145.00 20 3,000.00 0.00 93.07 7.47 56,542 (0) (0.00) (0) (0.00) [93.10] [7.43] September263,000.00 96 5,846.00 65 3,000.00 0.00 93.04 7.50 57,317 (1) (375.00) (1) (375.00) [93.08] [7.45] 2008 September104,000.00 194 15,037.00 46 4,000.00 0.00 91.88 8.86 57,416 (0) (0.00) (0) (0.00) [91.92] [8.81] September241,000.00 87 3,383.98 36 1,000.00 0.00 91.93 8.80 55,041 (0) (0.00) (0) (0.00) [91.99] [8.73]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.growth deserves to be arrested through enabling credit and fiscal policies.2 Money, Gilt-Edged and Forex MarketsThough the psychology of the market par-ticipants was dominated by the uncertain-ties arising from the extraordinary devel-opments in the US financial markets, the actual operations of the market were partly affected by it and partly by domestic events. Consequently, there was pressure on money and foreign exchange markets following the drying up of liquidity. The call rates jumped to a high of over 14 per cent and the rupee-dollar exchange touched a five-year low of Rs 46.94 despite massive intervention by the RBI. In response, the RBI ushered in a number of measures to ease inflow of foreign and rupee liquidity into the system. Further, the external commercial borrowing (ECB) norms were also relaxed for the infrastructure companies in order to ensure better credit flow to them. The month began with the continuous easing of international crude oil prices which built-up expectations of a further easing of the domestic inflation rate. How-ever, the short-term money market rates ruled firm, as liquidity was under pressure due to a 25 basis points hike in the CRR effective from August 30. Following the huge advance tax outflows, along with dated security and enhanced treasury bill mobili-sation, there occurred immense pressure on liquidity. A statement of the new governor of the RBI, D Subbarao, that inflation had started to show signs of moderation buoyed the market. But, the statement regarding the rupee that it appeared fundamentally weak given the domestic inflation trends, pushed the rupee-dollar exchange that was already reeling under pressure due to the widening of current account deficit, forex outflows and huge demand for dollars from importers, below the Rs 45 benchmark. The sentiments were further hammered due to the unfolding of havoc in the financial markets. TheRBI undertook liquidity-aug-menting measures such as an increase in rates offered on bank deposits made by non-resident Indians, starting a second liquidity adjustment facility (LAF) on a daily basis and further permitting banks to avail of liquidity support even allowing them to dip below the 25 per cent the statutory liquidity ratio (SLR). Further, the RBI assured continued support to protect the rupee. The finance minister assured the market about the health of the banks and said that the central bank would ensure orderly movements of the rupee, which within a span of four days had crossed the Rs 45 mark. With the Chinese preferring easy money policy, there were expectations that theRBI would also pursueasimilar stance. Further, the staff strikeinnation-alised banks added to the pressureon short-term rates. Despite such liquidity strain, the government advanced its bor-rowings, which devolved partly on the primary dealers, and the yields firmed up. However, with the easing ofECB norms for infrastructurecompanies,

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MONEY MARKET REVIEWEconomic & Political Weekly EPW october 18, 200827Appendix Table: Secondary Market Operations in Government Papers: NDS and NDS-OM Deals(Amount in rupees crore) Descriptions Weeks Ending September 2008: Yield to Maturity on Actual Trading Total for the Month 26 19 12 5 of September 2008 AMT YTM CY AMT YTM CYAMT YTM CY AMT YTM CYAMT YTM CY1TreasuryBills A 91-DayBills 1671.65 8.56 1271.41 8.55 3155.41 8.60 2531.15 8.92 8629.62 8.68 B 182-Day Bills 273.31 8.65 377.61 8.75 72.28 8.76 643.67 9.06 1366.87 8.88 C 364-Day Bills 751.63 8.66 215.15 8.66 1249.65 8.76 8.97 693.18 2225.40 11.48 2 GOI DatedSecurities A Regular(in % Year) 5.48 , 2009 1632.25 8.82 5.61 855.00 8.66 5.60 2312.50 8.68 5.61 829.00 9.02 5.63 5628.75 8.77 5.61 6.65 , 2009 1.00 8.71 6.72 436.15 8.87 6.73 155.50 8.83 6.73 461.66 9.22 6.75 1054.31 9.02 6.74 6.96 , 2009 OMC SB ---60.00 9.80 7.06 ------60.00 9.80 7.06 7.07 , 2009 OMC SB 417.00 9.65 7.16 437.00 9.80 7.17 240.00 9.59 7.16 - - - 1094.00 9.70 7.16 7.33 , 2009 OMC SB ---------20.00 9.49 7.41 20.00 9.49 7.41 11.50 , 2009 0.02 9.97 11.40 ---15.00 8.88 11.31 ---15.02 8.88 11.31 11.99 , 2009 0.74 8.60 11.79 40.50 8.62 11.78 6.30 8.75 11.79 ---47.54 8.63 11.78 5.87 , 2010 9.20 8.61 6.07 255.38 8.48 6.06 854.45 8.63 6.07 1013.00 8.99 6.10 2132.03 8.78 6.09 6.20 , 2010 UTI SB 55.00 9.57 6.47 ---------55.00 9.57 6.47 7.50 , 2010 ------31.53 8.79 7.65 21.00 9.05 7.68 52.53 8.89 7.66 7.55 , 2010 0.33 8.37 7.64 10.30 8.79 7.70 ------10.63 8.78 7.69 11.30 , 2010 90.03 8.65 10.82 130.70 8.73 10.83 159.62 8.82 10.85 500.65 9.12 10.90 881.00 8.96 10.87 12.25 , 2010 20.55 8.65 11.58 0.40 8.59 11.56 1.15 8.75 11.59 30.00 9.13 11.65 52.10 8.93 11.62 12.29 , 2010 ---65.00 8.61 11.75 ---0.19 9.06 11.80 65.19 8.62 11.75 6.57 , 2011 40.00 8.58 6.87 85.00 8.42 6.84 130.00 8.73 6.89 ---255.00 8.60 6.87 9.36, 2011 ---------25.00 8.959.26 25.00 8.959.26 9.39 , 2011 285.00 8.57 9.21 59.00 8.43 9.18 45.00 8.73 9.24 30.00 8.82 9.26 419.00 8.59 9.21 10.95 , 2011 24.94 8.61 10.38 ---------24.94 8.61 10.38 11.50 , 2011 ------30.00 8.75 10.76 ---30.00 8.75 10.76 12.00 , 2011 ------25.00 8.88 11.08 ---25.00 8.88 11.08 7.40 ,2012 0.13 9.43 7.88 10.00 8.53 7.67 2.18 8.89 7.75 0.71 9.14 7.82 13.02 8.64 7.69 7.47 , 2012 OILMKTBONDS ---5.00 9.20 7.87 10.00 9.14 7.85 ---15.00 9.16 7.86 7.27 , 2013 1.30 8.53 7.65 ---16.49 8.52 7.65 715.00 8.58 7.67 732.79 8.58 7.67 9.77 , 2013 FRB ---55.00 8.35 9.24 ------55.00 8.35 9.24 12.40 , 2013 0.21 9.01 10.96 9.87 8.42 10.71 0.04 8.51 10.75 0.03 8.76 10.84 10.15 8.43 10.72 7.37 , 2014 400.50 8.63 7.80 6.00 8.26 7.67 0.66 8.63 7.80 1.00 8.94 7.91 408.16 8.62 7.79 11.83 , 2014 1.14 8.50 10.23 11.00 8.16 10.07 ---1.68 8.99 10.45 13.82 8.29 10.13 7.38 , 2015 17.00 8.62 7.88 911.50 8.11 7.67 0.20 8.77 7.95 30.00 8.74 7.93 958.70 8.14 7.68 8.01 , 2015 FRB ---50.00 8.30 8.13 ------50.00 8.30 8.13 9.87 , 2015 FRB II ---15.00 9.12 9.51 ------15.00 9.12 9.51 10.47 , 2015 ---15.00 8.58 9.59 15.00 8.65 9.62 30.00 8.95 9.76 60.00 8.78 9.68 11.50 , 2015 0.81 8.80 10.14 0.50 8.48 9.99 15.00 8.69 10.09 17.00 8.95 10.21 33.31 8.82 10.15 7.56 , 2016 105.00 8.59 8.03 140.00 8.45 7.97 53.00 8.57 8.02 5.00 8.85 8.12 303.00 8.53 8.00 12.30 , 2016 0.36 8.61 10.20 19.32 8.44 10.11 15.00 8.77 10.28 21.61 8.99 10.40 56.29 8.74 10.27 7.46 , 2017 ---0.70 8.33 7.89 39.99 8.60 7.99 0.26 9.00 8.23 40.95 8.60 7.99 7.49 , 2017 188.41 8.75 8.10 139.50 8.24 7.85 - - - 64.00 8.83 8.14 391.91 8.58 8.02 7.99 , 2017 10.30 8.62 8.31 104.05 8.14 8.07 485.00 8.53 8.26 130.00 8.59 8.29 729.35 8.49 8.24 8.07 , 2017 - - - 32.00 8.27 8.17 152.00 8.54 8.30 30.00 8.81 8.44 214.00 8.54 8.30 5.69 , 2018 ---31.24 8.23 6.87 1.00 8.70 7.10 0.51 8.77 7.14 32.75 8.25 6.88 6.25 , 2018 1.27 8.41 7.24 3.50 8.41 7.25 11.25 8.56 7.32 2.50 8.95 7.52 18.52 8.57 7.33 8.24 , 2018 24896.45 8.57 8.44 27149.23 8.24 8.24 21180.57 8.38 8.32 18758.26 8.57 8.42 91984.51 8.43 8.35 12.60 , 2018 ON TAP ---35.00 8.45 9.85 ------35.00 8.45 9.85 8.15 , 2022 FCI SB ---13.88 9.22 8.89 32.58 9.66 9.21 448.60 9.98 9.44 495.06 9.94 9.41 8.30 , 2023 FERT SB - - - 118.55 9.29 9.02 47.30 9.61 9.26 1.78 9.63 9.28 167.63 9.38 9.09 7.95 , 2025 OMC SB ---15.91 9.13 8.85 22.97 9.61 9.24 0.04 9.60 9.19 38.91 9.41 9.08 8.24 , 2027 ---5011.47 8.53 8.47 10518.19 8.94 8.79 14322.01 9.29 9.07 29851.67 9.04 8.87 7.95 , 2032 1302.50 8.96 8.82 3619.09 8.54 8.46 2590.36 8.91 8.77 2457.95 9.33 9.15 9969.90 8.89 8.76 8.28 , 2032 166.60 9.20 9.08 751.50 8.50 8.47 35.25 8.86 8.78 151.00 9.25 9.12 1104.35 8.72 8.66 8.33 , 2032 ---600.00 8.33 8.33 ------600.00 8.33 8.33 7.40 , 2035 - - - 100.60 8.41 8.29 20.65 9.14 8.95 1.00 9.50 9.29 122.25 8.54 8.41 8.33 , 2036 10.02 9.27 9.19 20.90 8.58 8.55 85.88 8.85 8.80 51.00 9.34 9.25 167.80 8.99 8.93 Sub-total 29692.83 8.62 8.28 41450.25 8.35 8.20 39388.49 8.61 8.27 40190.27 8.93 8.60 150721.84 8.62 8.34B RBI’s OMO: Sales 3.00 - - 25.00 - - 497.00 - - 1233.00 - - 1758.00 - - Purchase ---25.00 --515.00 --382.00 --922.00 --Sub-total 3.00 --50.00 --1012.00 --1615.00 --2680.00 -- (A+B) 29695.83 8.62 8.28 41500.25 8.35 8.20 40400.49 8.61 8.27 41805.27 8.93 8.60 153401.84 8.62 8.343 Market Repo 62168.53 54020.80 77269.47 56663.99 250122.79 4 State Govt Securities 220.26 8.75 8.78 91.81 8.57 8.76 189.87 8.72 8.93 47.94 9.11 9.04 549.88 8.74 8.85 Grand total (1 to 4) 94781.21 97477.03 122337.17 101700.99 416296.40 (-) 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. (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.as compared with 9.14 per cent set in the previous month’s re-issue. Similarly, the yield set on 24-year paper was much lower at 8.70 per cent as against 9.88 per cent in the previous monthThe unscheduled auction was conducted on September 26 by re-issuances of 7.94 per cent 2021 and 8.28 per cent 2032 for notified amounts of Rs 6,000 crore and Rs 4,000 crore, respectively. Given the pressure on liquidity, the market participants had bid for higher yield rates, which was not acceptable to the RBI and so the 13-year paper was partly devolved on the primary dealers to the extent of Rs 1,641 crore,
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