New Delhi, Jan 28 (NationPress) Although the RBI has reduced the repo rate by 125 basis points and has actively injected/announced Rs 6.6 lakh crore in the current fiscal as part of open market operations (OMO), yields remain stubbornly unchanged. This level of liquidity management has led to uneven transmission across market segments, according to a report by SBI Research released on Wednesday.

This situation is remarkable, marking the largest OMO in the history of monetary management. When considering the CRR injection, buy/sell swaps, and currency leakage, the total liquidity injection stands at approximately Rs 5.5 lakh crore, as highlighted in the report.

“Firstly, there is a positive aspect. Due to a significant reduction in bank lending rates compared to corporate bond yields, the pricing gap has narrowed, thus encouraging corporates to return to banks for loans. Bank credit is now more appealing than market borrowing,” stated Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India.

The decline in pricing discrepancies between bank loans and the bond market is particularly pronounced among higher-rated corporates.

Secondly, as 65 percent of loans are benchmarked to EBLR, the transmission to bank lending rates has been rapid, with the weighted average lending rate (WALR) on new rupee loans decreasing by 62 basis points to 8.71 percent in November 2025.

“However, monthly trends reveal an uptick in money market rates since August 2025, with December rates higher than in November, despite further easing of monetary policy. In the bond market, the AAA Corporate bond yield for 10-year notes, which had decreased until early June, has started to rise again,” Ghosh explained.

The disparity is even more pronounced in the case of state development loans, with the weighted average yield of borrowing during April-December 2025 rising to 7.16 percent (only 7 basis points lower than 23 percent in April-December 2024).

Interestingly, the RBI's decision to prepay the entire amount borrowed in repo for 90 days, as announced today, is unprecedented globally. This could introduce some volatility, but it is promising that the RBI is innovating in liquidity management, potentially leading to new bidding strategies, the report suggests.

“We recommend that the RBI conducts OMO in liquid papers to create a significant impact on yields. For instance, the current 10-year paper is at 6.48 percent for 2035. The RBI could focus on the preceding 10-year paper, which is at 6.33 percent for 2035, or other immediate outgoing benchmark papers,” the report advised.

This strategy would enhance yield curve signaling in the most recent liquid papers, potentially revitalizing market sentiments across various segments.

“The reduced pricing gap between bank lending rates and corporate bond yields has made bank credit more attractive for corporates, leading them to shift back towards banks for loans,” the report concluded.