Macroeconomic and Monetary Developments in 2005-06
-Announced on the 17th April 2006
Indian financial markets remained orderly during 2005-06 even as interest rates edged up across the spectrum.
Money market conditions, which remained comfortable up to October 2005, turned somewhat tight thereafter. Call money rates generally remained within the repo-reverse repo rate corridor except the last quarter of 2005-06. Rates in the collateralised segments of the money market – the market repo (outside the LAF) and the Collateralised Borrowing and Lending Obligation (CBLO) segments – however remained within the corridor. The collateralised segments account for a growing and predominant share (about 70 percent) of the total money market turnover. The call rates have eased to below 6.0 per cent during April 2006 so far, reflecting improvement in liquidity conditions.
The foreign exchange market remained more or less orderly, exhibiting two-way movements.
Yields in the Government securities market hardened during 2005-06, with the increase at the longer end less than at the short-end.
In the credit market, deposit and lending rates edged up during the year as credit demand accelerated further.
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