RBI's Monetary Policy Reinforcement with WACR as Key Target

The Reserve Bank of India (RBI) has affirmed that the overnight weighted average call rate (WACR) will remain the primary operating target of its monetary policy. Announced on Tuesday, this strategy aims to stabilize short-term bank borrowing rates and ensure efficient transference in the financial markets.

In its revised liquidity management framework, the RBI retains the symmetric corridor system. This places the policy repo rate at the midpoint, with the standing deposit facility and marginal standing facility providing the lower and upper boundaries. These adjustments seek to align the WACR closely with the policy repo rate by utilizing specified instruments.

The central bank also declared changes in liquidity operations, shifting focus from 14-day variable rate repos to 7-day operations. Such measures, informed by an internal review and public feedback, aim to enhance predictability and responsiveness in RBI's monetary interventions.

(With inputs from agencies.)