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Marginal hike in FPI caps not helping bond markets: Credit Suisse's Neelkanth Mishra

"The token increase in FPI limits is not working because we are not part of any global bond index," said Mishra, who is also the co-head for APAC strategy and chief India strategist for Swiss investment bank Credit Suisse. He said there should be greater differentiation in cost of borrowing of different states based on their fiscal position.

PTI|
Dec 10, 2019, 09.45 PM IST
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According to Mishra, one of the reasons the poor monetary transmission is because the premium is at its widest level now and "it is at a record high after last week decision of the RBI."
Mumbai: Neelkanth Mishra, the noted economic analyst and a part-time member of the Prime Minister's Economic Advisory Council, on Tuesday said hiking the foreign portfolio investment cap has not worked for the bond market yet.

"The token increase in FPI limits is not working because we are not part of any global bond index," said Mishra, who is also the co-head for APAC strategy and chief India strategist for Swiss investment bank Credit Suisse.

He said there should be greater differentiation in cost of borrowing of different states based on their fiscal position.

"It is desirable to have a greater differentiation in cost of borrowings; they must have much greater exposure to the bond markets as well," Mishra told a function organized by the NSE and New York University.

But he admitted that it cannot be done shortly but may be possible over the next decade. But at least a policy thinking should be there now on how to go about, which fortunately is currently on now.

According to Mishra, one of the reasons the poor monetary transmission is because the premium is at its widest level now and "it is at a record high after last week decision of the RBI."

On the state-run banks, he said they have capital but they do not have products and processes to cater to the demand for credit that exist right now.

IIM Ahmedabad director Errol D'Souza said the statutory liquidity ratio requirement for banks are too high and said "there is no good reason that government should be borrowing 19 or 19.5 percent of my deposits."

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