ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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PRICES- Chicken Come Home to Roost

have been allowed to enter the market as tenderers, with the proviso that they will be required to observe a minimum size or operation of Rs 20 crore per transaction which would be permitted only through the DFHI. The RBI perhaps believes that the expected flow of bulk funds will stabilise the call money market rates and help banks to meet their liquidity needs from the market. Furthermore, with a view to bringing short-term money market instruments within the reach of individual investors with investi- ble funds of a minimum of Rs 1 lakh and who can lock in these funds for a period of three months, the Reserve Bank has felt it "desirable" to allow scheduled commercial banks and their subsidiaries to set up Money Market Mutual Funds. The funds would ultimately be deployed in CPs, CDs, treasury bills and short notice money. To this end, was it necessary to in- troduce another tier of intermediaries in the financial market? One cannot help being sceptical about how these two measures taken together would help improve the efficacy of monetary policy, though they would allow the RBI to bask in the glow of pursuing monetary liberalism of sorts. As a part of the policy package, the Reserve Bank has liberalised the guidelines with respect to the issue of commercial paper and enhanced the limits for issue of certificates of deposits by commercial banks. The aggregate limit for issue of CDs has been now raised to Rs 7,537 crore. Although the amount mobilised by the banks through CDs has been small so far, the Reserve Bank should start considering whether these certificates should not be included in one of the monetary measures evolved by it.

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