The Reserve Bank of India has announced an open-market sale of government securities worth a combined ₹1 trillion, or approximately US$10.47 billion, to withdraw surplus money from India’s banking system.
The operation will be conducted in three stages. The RBI plans to sell ₹500 billion in securities on September 17, followed by two sales of ₹250 billion each on September 21 and September 28.
India’s banking system accumulated a substantial liquidity surplus after banks mobilized about US$127 billion through an RBI-supported foreign-exchange programme involving Foreign Currency Non-Resident deposits. Average surplus liquidity during September was reported at approximately ₹10.25 trillion, equivalent to about 3.8% of bank deposits.
The excess funds pushed short-term overnight interest rates below the lower end of the RBI’s monetary-policy corridor. The central bank had already used variable-rate reverse repos and dollar–rupee swaps, but limited participation from banks prompted it to adopt the more forceful bond-sale option.
The measure may place upward pressure on government bond yields and borrowing costs. However, it is a banking-system liquidity operation and does not freeze NRI accounts, reduce deposit balances or impose a new liability on individual overseas depositors.
