MUMBAI - India's central bank is widely expected to keep rates on hold on Friday but any further liquidity withdrawal measures alone may push market yields higher, causing another increase in effective rates, treasury officials and analysts said.
"The I-CRR was an indirect rate hike as the RBI had been looking to keep overnight rates closer to the MSF rate," said Arun Bansal, executive director and head of treasury at IDBI Bank. "Any rise in liquidity surplus would be a short-term phenomena and liquidity will drain out due to a rise in currency in circulation, which will pick up pace in the current quarter," said A Prasanna, head of research at ICICI Securities Primary Dealership.
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