The Reserve Bank of India will continue to manage yields with smooth liquidity management, experts feel after the Reserve Bank of India declared a status quo policy on repo rates.
"The bigger move was with regards to yield management as the RBI stressed on smooth liquidity management and orderly Gsec borrowings, with a more vocal and defined GSAP.
Of the residual Rs 400bn GSAP 1.0, around Rs 100 billion will be allocated to SDLs, while the GSAP 2.0 amount will be higher at Rs1.2tn for 2QFY21. This would further ensure lower sovereign risk premia ahead amid elevated borrowing calendar this year," says Madhavi Arora, Lead Economist, Emkay Global Financial Services.
According to Abheek Barua, Chief Economist, HDFC Bank, the announcement of GSAP 2.0 for Rs 1.2 lakh crore and the carve out for SDLs bonds in the program is likely to help ease the pressure in the bond market, especially given the higher state borrowing pressure and increase in Centre borrowings this fiscal.
Additional measures to enhance liquidity has gone down well with the experts.
Says Shishir Baijal, Chairman & Managing Director, Knight Frank India. "We welcome the RBI's move to maintain status quo on key policy interest rates. Although expected, the RBI has continued its growth supportive policy stance. Additional measures to enhance liquidity support to most vulnerable touch sensitive sectors and small businesses; and expanded credit exposure limit for resolution is a great move.
"The GSAP 2.0 bond-buying program worth Rs 1.2 lakh crore will ensure system liquidity and smooth government borrowing for the current financial year. The central bank's focus on growth, assuring proactive, preemptive policy support till growth stabilizes will positively impact the market sentiment. The sector-specific approach to provide liquidity support from healthcare to hospitality will ensure a quick recovery, arrest job losses in the affected sectors. Raising the limit for MSME loan restructuring is a big positive given the impact the sector has on the broader economy," says Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm.