RBI cancels Treasury bill auction amid high bids to boost liquidity

Central bank rejects all bids at weekly auction, aiming to avoid signalling higher yields and support liquidity ahead of financial year-end

The Reserve Bank of India on Wednesday rejected all bids at the weekly Treasury bill auction due to elevate bid levels, said dealers. The move is expected to support banking system liquidity ahead of the financial year closing.

 

“The bids must have been higher, which could have led to the cancellation. This was the last auction of the financial year, and the government is in a comfortable position. The RBI must not have wanted to signal higher yields,” said a dealer at a primary dealership. The cash balance position of the government is seen at ₹4.5 trillion. 

The government had planned to raise ₹35,000 crore through the sale of 91-day, 182-day, and 364-day Treasury bills on Wednesday. 

 

Earlier, in February 2025, the central bank had cancelled the auction of 91-day and 182-day T-bills but not the 364-day auction. 

Market participants said the decision comes at a time when liquidity conditions have tightened marginally, even as the government’s cash balances remain comfortable following recent tax inflows. Inflows from maturing Treasury bills are due on Friday, and with no corresponding outflows, the auction cancellation is likely to further ease liquidity conditions.

 

“The RBI cancelled the T-bill auction to support liquidity conditions of banks,” said a dealer at a private bank. “We are in surplus now, but the RBI would like liquidity to remain adequate at the end of the financial year,” he added.

 

Tightening banking system liquidity due to advance tax outflows and forex intervention has further pushed up short-term rates.

 

Attention is now shifting to the Treasury bill borrowing calendar for the April–June quarter of the upcoming financial year, expected to be released by Monday evening. Traders expect a sharp increase in short-term borrowing in the first quarter of the next financial year, as the government typically front-loads its financing needs.

 

After two days of deficit, net liquidity in the banking system was back in surplus of ₹61,628 crore on Tuesday, the latest data from the RBI showed.

 

Government bond yields have hardened in recent weeks, with the benchmark 10-year paper edging towards the 6.90 per cent mark due to both global and domestic factors.

 

The yield on the benchmark 10-year government bond settled at 6.88 per cent, against the previous close of 6.87 per cent. In March, the yield of the 10-year bond has hardened by 22 basis points.