The RBI logo is displayed on a gate at the central bank’s headquarters in Mumbai (Photographer: Vivek Prakash/Bloomberg)

RBI’s Use Of Call Money Rate Does Not Make Sense, Says Ananth Narayan

The Reserve Bank of India’s use of weighted average call rate isn’t an appropriate metric to measure asset-liability mismatch, according to Ananth Narayan, professor at S.P. Jain Institute of Management and Research.

“WACR does not make sense because it does not capture what the market means when they talk about liquidity issues,” he told BloombergQuint during an interview. “There needs to be a change in this framework of measurement of liquidity and the ‘metric’ needs to be amended,” he said. “There has to be a choice between keeping the systemic banking liquidity either surplus, neutral or deficit based on the actual monetary policy stance—accomodative, neutral, or tightening.”

Call money rates are the interest rates at which banks lend money to each other.

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