The Reserve Bank of India (RBI) announced on September 11 that it will conduct a net bond sale of 1 trillion rupees via open market operations. This move aims to absorb excess liquidity from the banking system, which has reached a record surplus of approximately 10.25 to 11 trillion rupees. The intervention is the first of its kind in two years.
The sales are scheduled in three tranches: 500 billion rupees on September 17, and 250 billion rupees on both September 21 and September 28. This strategy intends to manage the surplus gradually without causing shocks to the interbank market. The excess liquidity resulted from a forex mobilization program that raised $127 billion.
Following the announcement, the yield on the benchmark 10-year sovereign bond rose to 7.035%. RBI Governor Sanjay Malhotra stated that the central bank possesses additional tools, such as foreign exchange swaps, to manage the situation. The RBI currently holds about 23 trillion rupees in government securities, allowing for further operations if necessary.
