A Reserve Bank of India panel has recommended that the central bank take a more flexible approach to managing how it provides money to lenders, a move aimed at ensuring changes in borrowing costs are more clearly felt in the real economy.
Instead of sticking mainly to its existing method — injecting or withdrawing cash from banks every two weeks — the RBI should primarily use a seven-day funding window, according to the panel’s report released Wednesday. This would help the central bank better control the flow of money and ensure that borrowing costs for banks are more closely aligned with the official interest rate.