India’s central bank, the Reserve Bank of India (RBI) allowed the relaxation of rice band limits of government securities traded on the first trading day of the year.

The Fixed-Income Markets and Derivatives Association (FIMMDA) also changed the price band in order to prevent cancellation of more than Rs 5,000 crore worth of deals made on Monday.

RBI’s Negotiated Dealing System-Order Matching (NDS-OM) platform states that the price band for bids and offers should be within 1 per cent of its previous close for liquid securities. As for the non liquid securities the band is 1.25 per cent of its previous close. This band was introduced in October 2011 to prevent wrongdoings.

Yields on the 10-year benchmark government bond were down 18 basis points on Monday. The bond prices had risen due to indications that the central bank will cut interest rates in order to boost economic growth in the Indian economy. The yields on India’s 10-year bonds fell to its lowest level in two weeks due to perception that the country’s central bank might increase cut interest rates for reversing the economic slowdown in the Indian economy.

The rates fell 17 basis points in December, which is the highest fall since May 2010. The Reserve Bank of India (RBI) has increased its key benchmark interest rates 13 times since March 2010 in order to control inflation in the country. According to analysts, the investors are expecting a reversal in the cycle of interest rate changes and this is affecting yields of the Indian bonds.

The RBI governor D Subbarao has already indicated that the central bank is considering a reversal of the monetary policy as the inflation is falling and the high interest rates have affected economic growth in the country.