RBI brings forward ₹1 trillion bond purchases to ease liquidity pressure

India's central bank on Tuesday advanced plans to buy 1 trillion rupees ($10.9 ‍billion) of bonds ​in two tranches by January 29 and February 5, instead of the previously announced February 5 and 12.

 

The move follows a surge in Indian government bond yields earlier in the day, which ​pushed the benchmark yield to a near 11-month high, pressured by heavy state borrowing and tight system liquidity.

 

The two open market bond purchase auctions of 500 billion rupees each are part of a broader set of measures unveiled by the Reserve Bank of India last week to inject more than $23 billion of liquidity into the banking system. The bank plans to do this through a combination of bond purchases, buy/sell FX swaps ‌and repo operations.

 

 

The RBI bought 3 ​trillion rupees of bonds during December-January, boosting the note-purchase tally for the fiscal year to a record 5.7 trillion rupees.

 

Under Governor Sanjay Malhotra, ‍the RBI has stepped up liquidity injections over the past year to reinforce its rate ‍cuts ‌and to manage ​the impact RBI's market ‍interventions to support the rupee have on banking system ‍liquidity.