RBI opts for sharp liquidity drain through $10.5 billion debt sale
India's banking system is flush with surplus cash after lenders raised a much larger-than-expected $127 billion under the RBI's special forex mobilisation scheme
The Reserve Bank of India announced a $10.5 billion bond sale on September 16-28 to absorb excess liquidity in the banking system. RBI Governor Sanjay Malhotra stated that all tools remain available, including open market operations, FX swaps, and bond sales. The central bank aims to bring overnight rates back within the monetary policy corridor, as high liquidity and rising oil prices threaten inflation.
This marks the first scheduled bond sale since September 2024 and the first simultaneous purchase and sale since fiscal 2021-22. Traders and analysts have expressed concerns that the bond sale could increase government borrowing costs at a time when bond yields have already risen. The RBI may use a market stabilization scheme as a last resort, but prefers a CRR hike to keep bond yields stable.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
