FM Nirmala Sitharaman defends RBI: ‘Reining in inflation, capital outflows’
Defending the interest rate hikes by the Reserve Bank of India (RBI), Finance Minister Nirmala Sitharaman on Monday said that the central bank is not necessarily synchronising with central banks of the developed world, but acting to control inflation and capital outflow. “None of us would want inflation to be completely out of control. The RBI’s business is to manage inflation and keep it under expected limits governed by an Act. It is not necessarily synchronising and at the same time also watching the global movement of capital. Once the interest rate goes up somewhere, capital runs that side. They are all interlinked,” Sitharaman said at a post-Budget interaction in Jaipur. The comments by Sitharaman come in the backdrop of a 25-basis points repo rate hike by the RBI on February 8, taking the key benchmark interest rate to 6.5 per cent.
India Inc’s borrowing costs rise as corporate bond yields harden
A rout in domestic bond markets caused by fresh concerns of an extended monetary tightening cycle has resulted in a spike in borrowing costs for corporate entities as yields on bonds issued by private firms have shot up. The surge in corporate bond yields has largely occurred in line with yields on government bonds, which are the benchmarks for pricing debt raised by the private sector. Bond prices and yields move inversely. Yields on benchmark three-year corporate bonds have risen 15 basis points (bps) since the Reserve Bank of India’s (RBI’s) policy statement on February 8 till the end of last week, while those on five-year bonds have climbed 12 bps, Bloomberg data showed. A significant part of corporate fundraising through debt occurs in these maturity brackets. The 10-year corporate bond yield has risen 15 bps.
FM Nirmala Sitharaman defends RBI: ‘Reining in inflation, capital outflows’
Defending the interest rate hikes by the Reserve Bank of India (RBI), Finance Minister Nirmala Sitharaman on Monday said that the central bank is not necessarily synchronising with central banks of the developed world, but acting to control inflation and capital outflow. “None of us would want inflation to be completely out of control. The RBI’s business is to manage inflation and keep it under expected limits governed by an Act. It is not necessarily synchronising and at the same time also watching the global movement of capital. Once the interest rate goes up somewhere, capital runs that side. They are all interlinked,” Sitharaman said at a post-Budget interaction in Jaipur.
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Sector in focus – Infrastructure, Banks, IT & Energy.
