India’s Reserve Bank’s unexpected move to buy back bonds worth Rs 40,000 crore signals a shift towards easing liquidity. This departure from previous strategies aims to alleviate cash conditions, possibly leading to a neutral interest-rate stance in June. Economists suggest this move reflects a departure from maintaining overnight rates close to the Marginal Standing Facility rate. While liquidity conditions improved slightly in April, the RBI’s proactive measures indicate anticipation of potential liquidity constraints due to election-related spending.
RBI’s Bond Buyback Points to Potential Shift in Policy Stance
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