India to drain US$10.5 billion from banks as excess cash surges
It will conduct bond sales in three tranches
The Reserve Bank of India plans to drain 1 trillion rupees (US$10.5 billion) from banks through bond sales, addressing a surge in excess cash that threatens inflation risks. The central bank will execute the bond sales in three installments on Sep 17, Sep 21, and Sep 28. Record-high surplus cash of around 11 trillion rupees has accumulated in banks following recent capital-raising windows by the RBI.
During the first auction on Sep 17, the central bank offered to sell notes maturing in 2029, 2030, 2031, and 2032. This excess debt supply may drive up sovereign bond yields, after a previous increase in line with global trends. Fixed income head at PGIM India Mutual Fund, Puneet Pal, anticipates further measures, including additional bond sales, to curb the liquidity surplus distorting the yield curve.
The RBI has amassed a substantial stock of government bonds, increasing by over 40% last fiscal year to about 23 trillion rupees, equivalent to roughly 18% of outstanding central government securities.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
