RBI Weighs Secured Rate in Place of WACR for Liquidity
Why in the news
RBI Governor Sanjay Malhotra signalled that the central bank may drop the call rate as its policy anchor and consider a collateral-backed benchmark.
Key facts
- Present anchor: uncollateralised WACR; possible replacement: Secured Overnight Rupee Rate (SORR).
- Fits suggestions of the MIBOR Committee; a formal announcement was expected after consultations.
- Deputy Governor T. Rabi Sankar noted that interbank call money volumes had fallen sharply.
- TREPS (Triparty Repo) and Market Repo account for 98% of overnight activity.
Liquidity
| Item | Detail |
|---|---|
| Surplus target | About 1% of NDTL (around ₹2.7 trillion), flexible |
| Position on the Tuesday cited | Surplus of ₹1.32 trillion |
| December | Deficit, caused by advance tax outflows, capital flight and currency leakage |
- Malhotra called the target flexible: RBI will add or reduce liquidity as needed.
Significance
- Could change how banks price short-term borrowing.
- May improve policy transmission by tracking dominant secured segments.
Exam angle
- RBI Governor: Sanjay Malhotra; Deputy Governor: T. Rabi Sankar.
- Candidate benchmark: SORR (secured); present: WACR (unsecured).