RBI Net Bond Sales Cross ₹1 Trillion

India’s central bank has net sold government bonds worth ₹1 trillion during the current financial year, its largest annual net bond sale in more than a decade, according to treasury officials. Market participants expect the RBI to sell another ₹1 trillion by December.

The Reserve Bank of India is using bond sales to withdraw excess liquidity from the banking system after a special window allowed lenders to raise dollars. The additional liquidity had pushed overnight interest rates below the RBI’s policy rate, prompting the central bank to tighten liquidity conditions.

Meanwhile, investors continued selling government bonds after the government announced plans to raise borrowing through 15-, 30- and 40-year securities in the second half of the fiscal year. Analysts said increased government and state borrowing could keep longer-term bond yields elevated, while RBI liquidity operations may put pressure on shorter-term yields.

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