Archive · 22 Aug 2025
RBI Reviews Liquidity Framework, Proposes Key Changes
The Reserve Bank of India (RBI) is reviewing how it manages money in the economy.
They are considering changes to make it work better.
One idea is to stop using a 14-day loan system because it is not working well.
They want to keep using a specific interest rate to control money flow but are worried that it might be losing its effectiveness.
Also, they are thinking about how standalone primary dealers (SPDs) affect the market.
The main goal is to ensure the interest rates set by the RBI are in line with what is happening in the market.
RBI report suggests discontinuing 14-day variable rate repo/reverse repo operations.
The report recommends retaining the weighted average call rate (WACR) as the operating target.
Reduced activity in the overnight call money segment raises concerns about central bank control.
The IWG rejected MSF access for standalone primary dealers (SPDs).
The effectiveness of the liquidity management framework is tested by aligning the operating target with the policy rate.
- Who
- Reserve Bank of India (RBI) and economists.
- What
- Review of the Reserve Bank of India's (RBI) liquidity management framework.
- When
- Recently.
- Where
- India
- Why
- To improve monetary policy and market stability.
- Organization
- Reserve Bank of India (RBI)
- Report
- Internal Working Group (IWG) to Review the Liquidity Management Framework
- Operating Target
- Weighted Average Call Rate (WACR)
- Main Operation
- 14-day variable rate repo/reverse repo (VRR/VRRR) (to be discontinued)
Sources
RBI seeks view on whether headline or core inflation best guide to monetary policy
RBI releases discussion paper on policy framework; seeks views on retaining 4% CPI target
RBI seeks view on whether headline or core inflation best guide to monetary policy
RBI paper on monetary policy says raising inflation target above 4% could erode policy gains
Should rate-setting panel track headline or core inflation? RBI stirs debate
RBI seeks feedback on inflation targeting
Headline inflation best guide for conduct of monetary policy, experts say
