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Informist, Wednesday, Oct. 1, 2025

 

--RBI Malhotra: Net policy transmission to gilt yields is only about 30 bps

 

MUMBAI – The Reserve Bank of India feels that the yield on the 10-year benchmark gilt has scope to fall more, Governor Sanjay Malhotra said Wednesday. The net policy transmission to government bond yields has been only about 30 basis points, compared with the 100-basis-point cut in the repo rate since February, Malhotra said. The Monetary Policy Committee of the RBI on Wednesday kept the repo rate unchanged at 5.50%, for the second meeting in a row.   

 

"... The other thing is that 10-year (gilt yield) will not move one is to one," Malhotra said at the post-policy press conference. "Let's keep that also in mind. So 25-30 basis points (current transmission), while there is scope for more. We feel that it should head downwards. A number of measures have been contemplated in this regard, including how the primary G-sec auctions will be held, the tenure of these government offerings, not only central government, (but) as well as state government..."  

 

The governor noted that this year, the 10-year benchmark gilt yield had fallen from a peak of about 6.86% to 6.30% due to easing monetary policy, but had hardened after the June monetary policy announcement. 

Malhotra said that the central bank is watchful of the policy transmission through government bond yields, although bond yields ultimately depend on demand and supply. The central bank will address how to fulfil all the needs of the economy, Malhotra said.

 

The governor said inflation has declined by about 100 basis points since the June policy, which has opened up space for further policy easing. Though GDP growth surprised on the upside in Apr-Jun, the RBI has revised down its estimates for the second half of 2025-26 (Apr-Mar) and the first quarter of FY27 due to imposition of 50% on Indian goods by the US, which will partly offset the impact of goods and services tax rate cuts, Malhotra said.  End

 

Reported by Cassandra Carvalho

Edited by Saji George Titus

 

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