RBI to sell $2.6 billion of bonds, tighten bank reserve need to squeeze cash

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The Economic Times daily newspaper is available online now. Read Today's Paper RBI to sell $2.6 billion of bonds, tighten bank reserve need to squeeze cashReutersLast Updated: Oct 10, 2026, 01:48:00 PM ISTSynopsis

The Reserve Bank of India is set to initiate bond sales to better regulate liquidity within the banking system. As of October 16, banks will face a stricter cash reserve ratio requirement, further enhancing liquidity oversight. This follows the RBI's first key policy rate hike in almost four years, hinting at possible future increases.

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Loading...×India's central bank announced the next leg of open market bond sales and tightened daily maintenance of cash reserve ratio on Friday in a bid to further drain rupee liquidity from the banking system.

The Reserve Bank of India will sell 250 billion rupees ($2.58 billion) of bonds on Tuesday through open market operations, an effective liquidity-draining tool. The regulator also mandated that banks would need to maintain 99% of the daily CRR from October 16 against 90% earlier.

The moves come days after the RBI raised its key policy rate for the first time in nearly four years and signalled more rate hikes.

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The central bank did not announce any liquidity draining measures in the policy. RBI Governor Sanjay Malhotra said the surge in liquidity would not be a long-term phenomenon and a large amount of liquidity would get absorbed within this financial year the ends in March.

Last month, the RBI sold bonds worth 1 trillion rupees, the highest net sale in over a decade.

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Markets should be prepared for the liquidity surplus to fall below 1% of deposits and potentially lie in the 0%-0.5% of deposits range in the coming quarters, ICICI Securities Primary Dealership said in a note.

"OMO sales have led to bear flattening of the yield curve," the primary dealer said.

India's banking system liquidity surplus has averaged more than 7 trillion rupees ($72.37 billion) on a daily basis from September 1, amounting to 2.6% of deposits.

The RBI will sell bonds maturing from fiscal 2030 to fiscal 2035, including 7.88% 2030, 6.10% 2031, 7.95% 2032, 7.26% 2033, 7.18% 2033 and 7.10% 2034 notes.

Banks park 3% of their deposits with the RBI under CRR, and do not earn any income on these funds.
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