India's rate cuts didn’t lower all yields due to less liquid securities in monetary operations, per SBI Research.

Despite a record Rs 5.5 lakh crore liquidity injection and a 125 basis point repo rate cut, India’s monetary easing has not uniformly lowered market yields, according to SBI Research. Bank lending rates dropped quickly due to floating-rate loans tied to the external benchmark, but money market rates, government securities yields, and corporate bond rates remained stable or rose, especially after mid-2025. State Development Loan borrowing costs saw little change. The report attributes the uneven transmission to the use of less liquid securities in open market operations, recommending a shift to more liquid benchmark instruments to improve yield-curve signaling and restore confidence in debt markets.