Reshaping India's financial markets

We need to diversify the forex, credit and interest rate risks across the financial market

The decision by the State Bank of India (SBI) to expedite the transmission of policy rate by linking the asset and liability sides could reshape the Indian financial markets. On March 8, the SBI decided to link savings bank (SB) deposits with balances above Rs 1 lakh to the repo rate; all cash credit accounts and overdrafts with limits above Rs 1 lakh will also be linked to the repo rate. The risk premiums over and above the floor rate would continue to be based on the risk profile of the borrower.

SB deposits typically serve the transaction needs of the