DHAKA: The reason is about 900 billion rupees ($13.4 billion) in Reserve Bank of India cash infusions since April and the possibility of another 900 billion rupees via open-market bond purchases by March 31, according to HSBC Holdings Plc. When Urjit Patel takes his post on Sept. 4, he will be driven by a “neutral systemic liquidity” goal he designed with his boss Raghuram Rajan in April, meaning periods of cash shortages are balanced with surpluses.
“There is a paradigm shift in the way that monetary policy is operating, as the central bank uses the liquidity tool over interest rates,’’ said Suyash Choudhary, Mumbai-based head of fixed income at IDFC Asset Management Co. that oversees about 543 billion rupees of assets. “The promise of bond purchases has provided the biggest shield to the market.”
The Rajan-Patel duo introduced the policy seeking to pass on the benefits of the central bank’s five interest-rate cuts since early 2015 more widely into Asia’s third-largest economy that saw growth slow last quarter. Benchmark sovereign yields have fallen to seven-year lows; banks’ treasury incomes have swelled, companies are finding it cheaper to raise funds from the bond market and the government’s borrowing costs have fallen.
