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RBI Schedules ₹25,000 Crore Bond Sale for October 13
The Reserve Bank of India plans to sell government bonds worth ₹25,000 crore on October 13.
When the RBI sells bonds, banks and other buyers pay money to get them, which removes some cash from the banking system.
The RBI has also sold bonds in several auctions during September.
It is taking these steps because there is more money available in the banking system than it wants.
The RBI says it may sell more or fewer bonds than the announced amount, depending on bids.
Banks will also have to keep a larger share of their required cash reserves in place from October 16.
This requirement changes from 90% to 99%, but the overall CRR rate does not change.
Market participants say these steps together could make money less plentiful, while the effect on bond yields will depend on how banks and investors respond.
The RBI will auction ₹25,000 crore of government securities on October 13 through a multiple-price auction.
The securities mature from 2030 to 2034 and carry coupon rates ranging from 7.10% to 7.95%.
The central bank may accept bids above or below the notified amount.
The sale follows ₹1 lakh crore of OMO sales in September, as the RBI seeks to absorb surplus banking-system liquidity.
A higher daily CRR maintenance requirement takes effect October 16; market participants say the combined measures could tighten liquidity.
- Who
- The Reserve Bank of India (RBI), banks and investors participating in the bond auction.
- What
- The RBI scheduled a ₹25,000 crore government securities sale and is continuing measures to absorb surplus liquidity.
- Where
- India's government securities and banking markets.
- When
- The auction is scheduled for October 13; the higher CRR maintenance requirement begins with the fortnight starting October 16.
- Why
- The RBI is seeking to absorb surplus funds in the banking system and keep money-market conditions aligned with its monetary policy objectives.
Potential liquidity tightening
Impact depends on market response
Effect of OMO sales and higher CRR maintenance
Potential liquidity tightening
Market participants said the combined measures could tighten liquidity conditions further.
Impact depends on market response
The extent of the impact on bond yields depends on how banks and investors adjust to the additional liquidity drain.
Key facts
- Auction amount
- ₹25,000 crore
- Auction date and method
- October 13; multiple-price auction
- Securities
- Government securities maturing in 2030, 2031, 2032, 2033 and 2034
- Coupon rates
- 7.88%, 7.95%, 7.26%, 7.18% and 7.10%, respectively
- September OMO programme
- ₹1 lakh crore across three tranches
- Latest reported liquidity surplus
- ₹3.92 lakh crore on Thursday
- CRR maintenance requirement
- Raised from 90% to 99% of the prescribed requirement from the fortnight beginning October 16; the overall CRR rate is unchanged
Sources
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