RBI May Adopt ‘Secured Rate’ as Key Benchmark Tool

Speedy Summary

• The Reserve Bank of India (RBI) is reportedly exploring the use of a secured rate as a new operative benchmark tool.
• This move is aimed at improving upon existing financial benchmarking mechanisms in India.
• Changes to the operative benchmark tools by RBI are likely to influence monetary policy transmission and market dynamics.
• Further details on this growth remain exclusive and require subscription access.

Indian Opinion Analysis

The RBI’s potential shift towards using a secured rate as an operative benchmark indicates proactive measures to enhance market efficiency and improve monetary policy transmission. A secured rate, generally backed by collateral, adds stability and reliability compared to unsecured benchmarks that can be volatile. This decision could have notable implications for India’s banking system, enabling smoother adaptations in lending rates tied more closely to market realities. however, any transition will need careful alignment with existing frameworks to avoid operational disruptions.

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