Today · World Post
RBI has net sold ₹1 lakh crore worth of bonds so far this financial year, the biggest annual net sale in more than a decade, as it drains surplus liquidity. Market participants expect another ₹1-1.5 lakh crore in sales. By Reuters September 28, 2026, 6:20:46 PM IST (Published) 3 Min Read MUMBAI, Sept 28: India’s central bank has net sold bonds worth ₹1 lakh crore this financial year, its biggest annual net bond sale in more than a decade, treasury officials said, with market participants expecting the total to double by December.
The Reserve Bank of India is withdrawing liquidity from a banking system flush with cash after it allowed lenders to raise dollars through a special window. While the inflow helped protect the nation’s FX reserves and support the rupee as oil prices rose, it pushed overnight rates below the RBI’s policy rate. New Delhi recently reduced the supply of debt maturing in three and five years for the rest of the fiscal year, signalling more open-market operations (OMOs) from the RBI, market participants said.
Alok Sharma, head of treasury at ICBC, said he would rather reduce exposure to long-dated bonds than buy more. He expects OMO sales worth another ₹1 lakh crore, or a hike in banks’ cash reserve ratio. Either would be consistent with tighter monetary policy, which the majority of respondents to a Reuters poll expect to see with a policy rate hike next week.
According to RBI data available since FY2015, the previous record was in FY2018, when the central bank net sold ₹90,000 crore to deal with the fallout of the government’s decision to abruptly demonetise ₹500 and ₹1,000 currency notes. Harsimran Sahni, head of treasury at Anand Rathi Global Finance, which counts government debt worth around ₹15,000 crore among its assets under management, expects the RBI to sell an additional ₹1-1.5 lakh crore worth of bonds during October-November, factoring in prevailing liquidity conditions. NO RESPITE FROM BORROWING TWEAKS Meanwhile, any hope of a relief rally in the most actively traded government bonds disappeared, with investors selling across the yield curve as the government moved to raise borrowing through 15-, 30- and 40-year securities in its second-half fiscal year borrowing plan last Friday.
This increased supply, coupled with expected higher issuance by states, could keep the term premium elevated in the near term, Vikas Garg, head of fixed income at Invesco Mutual Fund, said. “We expect the yield curve to begin flattening at the shorter end as RBI drains liquidity and re-calibrates rates.” A federal finance ministry official, requesting anonymity as the person is not authorised to speak to the media, said net borrowing was kept at budgeted levels, as the government remains committed to fiscal prudence. “The focus on the long end will help us increase our weighted average maturity, which reduces the roll-over risk.” (Edited by : Sheersh Kapoor)
Source: CNBC TV18
