6 days ago
RBI Sells ₹500 Billion Bonds to Drain Surplus Liquidity
India’s central bank sold government bonds to remove extra money from banks.
It sold bonds worth ₹500 billion on Wednesday.
This was the first part of a larger plan to remove ₹1 trillion from the banking system.
The other two bond sales are planned for September 21 and September 28.
Banks had received a very large amount of extra cash.
Surplus cash reached ₹11 trillion earlier this month.
The extra money came partly from dollars deposited through a diaspora deposit programme.
Bond yields rose after the sale was announced and completed.
The Reserve Bank of India sold ₹500 billion ($5.2 billion) of bonds through open market operations on Wednesday.
The bonds covered maturities from 2029 to 2032, with cutoff prices ranging from ₹102.25 to ₹105.63.
India’s five-year bond yield rose six basis points to 6.83% after the auction results.
The sale was the first tranche of a planned ₹1 trillion ($10.5 billion) liquidity withdrawal.
The remaining operations are scheduled for September 21 and September 28, after banking-system surplus cash reached ₹11 trillion earlier this month.
- Who
- The Reserve Bank of India conducted the bond sale.
- What
- It sold ₹500 billion of bonds as part of a plan to drain surplus banking-system liquidity.
- Where
- The operation involved India’s banking and bond markets.
- When
- The first sale took place on Wednesday; further operations are scheduled for September 21 and September 28.
- Why
- The RBI is withdrawing excess cash from the banking system, where surplus liquidity had reached ₹11 trillion.
Key facts
- Bond sale
- ₹500 billion ($5.2 billion)
- Overall liquidity withdrawal
- ₹1 trillion ($10.5 billion)
- Bond maturities
- 2029 to 2032
- Cutoff prices
- ₹102.25 to ₹105.63
- Five-year bond yield
- 6.83%, up six basis points after the results
- Banking-system surplus cash
- ₹11 trillion earlier this month
- Upcoming operations
- September 21 and September 28
Sources
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