MUMBAI (Diya TV) — The Reserve Bank of India announced Friday that it will sell 1 trillion rupees, or about $10.47 billion, in government bonds over three auctions to absorb excess liquidity from the banking system.
The RBI will sell 500 billion rupees of bonds on Sept. 17, followed by sales of 250 billion rupees each on Sept. 21 and Sept. 28. The securities in the first auction mature between fiscal 2029 and fiscal 2032.
The announcement came hours after RBI Gov. Sanjay Malhotra said the central bank could use open market operations, foreign exchange swaps and other tools to manage liquidity.
India’s banking system has accumulated a record cash surplus after lenders raised about $127 billion through a special foreign-currency deposit program. Much of that money was swapped with the RBI, adding rupee liquidity to the banking system.
The liquidity surplus averaged about 10.25 trillion rupees in September, equivalent to roughly 3.8% of bank deposits.
Excess liquidity has pushed overnight interest rates below the lower end of the RBI’s monetary policy corridor. The central bank used variable rate reverse repo operations and dollar-rupee swaps earlier this week to absorb cash, but both drew limited participation.
The RBI last sold government bonds in the secondary market in September 2024. It also conducted simultaneous bond purchases and sales during fiscal 2021 and 2022.
India’s benchmark 10-year government bond yield has risen about 26 basis points over the past four weeks amid higher oil prices and rising global bond yields.
