ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Debt InstrumentsSubscribe to Debt Instruments

Strengthening Dynamic Role of Monetary Policy

The repo rate exceeding the overnight call money rate continuously for months and the forward premia for the US dollar in the domestic forex market dipping below interest rate differentials may be said to reflect loss of effectiveness of monetary instruments. To restore the dynamic aspect of monetary policy, action on three fronts is called for.

Credit Policy: Beyond Expansionary Signals

There are clear pointers in the Budget for 2002-03 to the stance likely to be adopted in the credit and monetary policy to be announced next month. However, mere expansionary signals from the RBI through reduction of the repo rate and the Bank rate and through money market instruments will not be enough. The RBI will need to address structural disabilities and distorted commercial banking behaviour in response to financial sector reforms.
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