"The RBI has manipulated the market. It kept the YTM at an artificially higher level in the last week of March and then brought it down on April 2 through the release of a new price list to ensure the smooth sailing of the government paper," one banker said under condition of anonymity.

These bankers have alleged that there was no change in market conditions between the last week of March and April 2. "RBI should have indicated a lower YTM had it cared for the market forces. It is using the YTM as a tool to achieve other purposes," bankers alleged.

However, public sector banks, which have larger securities portfolio and are not veryactive in trading, do not not share this sentiment. In fact, a majority of the public sector banks feel the RBI slashed the bank rate and repo rate in March to lower the YTM on government papers so that banks' bottomlines will get a boost.

In private, RBI officials also admit that one of the reasons behind lowering the bank rate and infusing liquidity into the system through a 50-basis point cut in banks' cash reserve ratio is to prop up profitability of PSU banks.

Private and foreign banks, however, feel they are being discriminated against as the RBI is biased in favour of PSU banks. "The entire exercise is aimed at helping the PSU banks. In the process, the smaller banks which are very active in trading securities get hurt," another banker said.

Some of the foreign banks and new private banks have been hit hard as the securities market was overtaken by turmoil in the wake of the tight money policy announced by the RBI on January 16. Banks made a beeline to offload securities at that time to generateliquidity.

"The YTM of dated securities as announced by the RBI does not reflect the market sentiment. The YTM of 10-year paper should have been less than 12.10 per cent. But the RBI kept it artificially high and brought it down only on April 2," bankers alleged.