India’s central bank is business unusual in a bid to boost lending

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The Reserve Bank of India pulls down borrowing costs after five rate cuts in 2019 failed to spur credit demand

Shaktikanta Das, Reserve Bank of India governor. Picture: REUTERS/DANISH SIDDIQUI

The gap between the main repurchase rate and the benchmark 10-year bond yield has begun to narrow as a result of its measures aimed at pulling down corporate borrowing costs, Reserve Bank of India governor Shaktikanta Das said in an interview on Tuesday. The RBI has adopted the tool kit of its peers to pull down borrowing costs after five rate cuts in 2019 failed to spur credit demand. A mix of a US Federal Reserve-style “operation twist” and the European Central Bank-like cash boost to banks has led to term spreads — the gap between 10-year debt and 364-day treasury bill yields — shrinking from a decade-high in December.

 

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