The Reserve Bank of India’s proposal to offer one percentage point extra haircut on margins for liquidity operations for rated state bonds may dampen prospects for poorly run states, say experts.
In its June monetary policy, the central bank said initial margin for rated SDL mortgaged with RBI for liquidity operation would be in the range of 1.5 to 5.0 per cent, depending on maturity basket. Unrated SDLs would have to take a haircut of 2.5 to 6.0 per cent. But the market is divided whether really the states would want to get rated to start with.
Also, the move to value