RBI gets more elbow room for bond purchases as banks return borrowed money

Indian banks are returning money they borrowed from the central bank earlier this year, boosting the monetary authority’s capacity to make more direct purchases of government bonds.

The Reserve Bank of India on Thursday said it would buy 100 billion rupees ($1.4 billion) of bonds from the secondary market on Sept. 24 in the first such direct purchase in six months. This marks a departure from its preference so far this year for Federal Reserve-like Operation Twists.

While direct open market operations end up adding cash to the banking system, twist operations are typically liquidity neutral as they involve simultaneous