RBI to sell Rs 1 lakh crore ($10.5 billion) in bonds to drain surplus liquidity
India's central bank announced a $10.47 billion bond sale across three tranches to remove excess cash from the banking system, following ineffective reverse repo auctions.
The Reserve Bank of India (RBI) on Friday launched a plan to drain approximately Rs 1 lakh crore ($10.5 billion) from the inter-bank market through open market operations. The central bank will conduct three sale tranches starting September 17: the first involves Rs 500 billion worth of bonds maturing between fiscal years 2029 and 2032, followed by two additional sales of Rs 250 billion each on September 21 and September 28. Officials stated this move follows a review of current liquidity conditions after variable rate reverse repo (VRRR) auctions failed to absorb durable liquidity effectively. Governor Sanjay Malhotra confirmed that all available tools, including open market operations and FX swaps, remain options given the banking sector's surplus cash. The excess liquidity stems from banks having raised $127 billion through a special forex mobilization scheme, pushing reserves to an all-time high. Consequently, overnight rates fell below the monetary policy corridor floor despite elevated oil prices threatening inflation.
