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India’s Central Bank Chief Experiments With Policy to Ease Rates

  • Das earlier opted for an unconventional 35bps rate cut
  • RBI has also conducted forex swaps to manage liquidity
Shaktikanta Das
Shaktikanta DasPhotographer: Dhiraj Singh/Bloomberg
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From a 35-basis point interest rate cut to embracing a Federal Reserve-style ‘Operation Twist’, Reserve Bank of India Governor Shaktikanta Das is pushing the boundaries of conventional central bank policy making to improve rate transmission and spur credit to the economy.

The central bank announced Thursday it will buy longer-dated debt and simultaneously sell shorter maturity notes in a concept similar to Operation Twist used by the U.S. Fed in 2011-12. The move is aimed at bringing down the soaring cost of borrowing, or term premia -- the difference between the benchmark 10-year yields and the central bank’s policy rate.