Mumbai, September 11 (Daily Kiran) : The Reserve Bank of India (RBI) has announced the sale of ₹1 lakh crore in government bonds through open market operations (OMO) to absorb excess liquidity in the banking system. This initiative targets bonds maturing between the fiscal years 2028-29 and 2031-32. The move aims to control increased liquidity in the financial system and maintain short-term interest rates close to policy levels.
The bond sale will occur in three phases. The first phase will see the sale of ₹50,000 crore on September 17, 2026. The second phase will follow with ₹25,000 crore on September 21, and the final phase will also offer ₹25,000 crore on September 28. This auction will be conducted using a multi-security and multiple price method.
This marks the RBI’s first net open market bond sale in the past two years. Previously, the central bank sold government securities in the secondary market in September 2024. During the fiscal years 2020-21 and 2021-22, the RBI had adopted a strategy of simultaneous bond buying and selling.
Eligible participants must submit their bids via the e-Kuber system between 9:30 AM and 10:30 AM on September 17, with results announced on the same day.
Following the RBI’s announcement, there was noticeable pressure in the government bond market. Yields surged, reaching their highest levels in over three months. The yield on the benchmark 10-year government bond increased by six basis points to 7.035%, while the five-year bond’s yield rose nearly ten basis points to 6.6222%.
Currently, the Indian banking system is facing an excess liquidity situation. Recently, banks raised significantly more funds than expected under the RBI’s special foreign currency mobilization scheme, leading to a record high in the country’s foreign exchange reserves. This influx has resulted in increased liquidity in the banking system.
Due to the surplus cash, overnight interest rates have dipped below the RBI’s repo rate. Consequently, the central bank finds it necessary to take measures to control liquidity. This situation arises amid rising crude oil prices in international markets, which could add further pressure on inflation.
A recent report indicated that the RBI might employ both temporary and permanent measures to manage excess liquidity. Possible actions could include foreign currency swaps, market stabilization scheme (MSS) bonds, open market operations (OMO), and a potential increase in the cash reserve ratio (CRR).
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