Das’s comments come at a time when the yield on the benchmark 10-year bond has been rising persistently despite RBI’s efforts to keep it at 6%. The 10-year bond yield touched 6.19% on Monday, the highest since 24 August
MUMBAI: Reserve Bank of India (RBI) will ensure an orderly evolution of the yield curve, said governor Shaktikanta Das, trying to assuage market concerns on surplus liquidity and government borrowing. In an interview to CNBC-TV18, Das also assured that the central bank will not drain liquidity prematurely to stifle growth.
“Right from October 2020, we have given explicit guidance to the bond market. We expect an orderly evolution of the yield curve, it cannot be otherwise," he said. "The messages from central banks are always a mix of words and subtle signals. At the moment, we are okay with the level of liquidity. All the instruments are on the table; if required we will use new instruments."
Das’s comments come at a time when the yield on the benchmark 10-year government bond has been rising persistently despite RBI’s efforts to keep it at 6%. The 10-year bond yield touched 6.19% on Monday, the highest level since 24 August.
RBI has been devolving auctions, or forcing underwriters of bonds to buy the bonds, or even cancelling auctions to check yields. With ₹12 lakh government borrowing programme coming up in the next financial year, the market expects the central bank to step up its bond buying through open market operations.
Das expressed confidence that inflation will continue to remain within the 6% target. While core inflation has remained elevated, RBI does not expect inflation to suddenly spike.
On the burning issue of crypto currency, Das said the central bank has conveyed its concerns to the government as it prepares to prohibit all private cryptocurrencies in the country and create a framework for an official digital currency.
In 2018, RBI had banned banks and other regulated entities from supporting crypto transactions after digital currencies were used for fraud post demonetisation. Last year, the Supreme Court struck down the curbs on crypto currency trades in response to a petition by cryptocurrency exchanges.