<ul data-eligibleForWebStory="true"><li>The Reserve Bank of India (RBI) has informally contacted bond traders to assess the market's comfort level with short-term borrowing costs after a selloff driven by liquidity concerns.</li><li>Officials at the RBI reached out to traders at banks for feedback on overnight borrowing costs, with the aim of avoiding disruptions to liquidity.</li><li>The central bank's outreach follows a week of volatility in India's bond market, with five-year sovereign bond yields rising by 25 basis points.</li><li>Investors were alarmed by the RBI's unexpected shift from an accommodative to neutral stance on June 6, leading to fears of tighter funding conditions.</li><li>The overnight borrowing rate has been notably lower than the central bank's main policy rate, creating looser financial conditions than intended by the RBI's rate cuts since February.</li><li>The market interpreted the RBI's stance change as a potential indication of liquidity withdrawal to realign overnight rates with the policy rate.</li></ul>

RBI Seeks Market View On Borrowing Costs Post Debt Selloff

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