The RBI this week announced new open market operations aimed at stabilising long-term bond yields. We think this is a sign of things to come as the authorities aim to keep government borrowing costs in check in order to put the public debt trajectory on a sustainable path. Meanwhile, borrowers have been given another lifeline after the RBI clarified that the debt moratorium could be extended by up to 12 months under the new loan restructuring scheme. But in the absence of major financial support, significant damage to household, firm and bank balance sheets looks unavoidable.
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