RBI proposes framework for acceptable bids at auctions to underwriters

RBI tries another way to tame bond yields as they have been rising in India on worries over inflation

The Reserve Bank of India wrote to primary dealers proposing a framework for defining acceptable bids at auctions, as underwriters are having to step in to rescue more bond sales.

RBI wants to define any bids that have a spread of more than two basis points from secondary market yields as outliers, according to people with knowledge of the matter, who asked not to be identified as the discussions are private.

Primary dealers are expected to act as a bridge between auctions and secondary markets, and shouldn’t bid too far from prevailing rates, the RBI said in the letter dated June 30,