Press Release RBI Working Paper Series No. 04 Assessing the Impact of Macroprudential Policies on Housing Credit Dynamics: Evidence from India Amar Nath Yadav, Vivek Kumar, Alok Kumar Chakrawal and Jyoti Kumari Abstract This paper evaluates the efficacy of macroprudential (MaP) policy in modulating bank credit to the housing sector and its impact on the asset quality of banks in the Indian context. The empirical analysis suggests that a tightening of MaP policy is effective in controlling bank credit to the housing sector. Tightening policies appear to have a greater impact on credit growth than easing policies. Furthermore, a tighter MaP policy complemented with a tighter monetary policy helps in reducing non-performing assets in the housing sector. JEL Classification: C23, E58, G21, G28 Keywords: Macroprudential policies, housing credit, credit risk

Drivers of Commercial Paper Rate Spread - An Empirical Assessment

Priyanka Priyadarshini, Anshul, Srijashree Sardar, Dipak R. Chaudhari and Sangeeta Das

Abstract

The commercial paper (CP) market provides an avenue for creditworthy firms to raise short-term loans to meet cash flow requirements without providing any collateral. The paper aims to empirically estimate the determinants of the CP rate spread over the T-Bill rate using daily data. The empirical analysis indicates that the volume of CP issuance, liquidity conditions, market risk, share of mutual funds in CP investment and share of NBFCs in the CP issuances impact the CP spread. Episodes of Initial Public Offering (IPO) raise the CP spread.

JEL Classification: G12, G15, G38

Keywords: Commercial paper, GARCH, money market, market liquidity

Press Release

Pricing of Interdealer OTC Derivatives in a Limit Order Market

Vidya Kamate and Abhishek Kumar1

Abstract

Using regulatory interdealer trade-level data on Overnight Indexed Swaps (OIS) in India, the paper examines the trading behaviour and prices in an interdealer market populated by traders of varying liquidity needs. Inactive investors, proxied by traders’ lower level of trading volume in the previous quarter, received a lower return relative to active investors when trading outside a Central Limit Order Book (CLOB) venue market but received relatively better returns on it. This differential return could be attributed to the differing levels of speed preference across investors with active investors being the most impatient or needing the quickest execution. Consistent with extant theoretical literature on speed frictions, active investors preferred trading on CLOB (faster venues). Inactive traders submitted limit orders and faced slower execution whereas active traders submitted market orders and received quicker execution on CLOB. The findings allude to the greater role played by liquidity requirements in a CLOB as opposed to other non-CLOB OTC markets where search and bargaining frictions dominate.

Press Release RBI Working Paper Series No. 08 Portfolio Flows and Exchange Rate Volatility: An Empirical Estimation for BRICS Countries Dipak R. Chaudhari, Pushpa Trivedi and Prabhat Kumar@ Abstract * This paper examines whether foreign portfolio flows are responsible for exchange rate volatility in the BRICS economies. Applying the GARCH (1, 1) model to monthly data from January 2000 to July 2021 on exchange rate returns, this paper finds that net portfolio flows in

Press Release RBI Working Paper Series No. 07 Regime-Dependent Determinants of the Uncollateralised Overnight Rate: The Interplay of Operating Procedure and Market Microstructure Edwin Prabu A Indranil Bhattacharyya@ Abstract 1 Efficient central bank liquidity management is premised on closely aligning the inter-bank overnight rate – the operating target of monetary policy – to the policy repo rate. However, sporadic shocks emanating from a host of factors – instituti