India's RBI schedules Rs 1 lakh crore of government bond purchases
Change
India's RBI scheduled open market operation purchases of government bonds totalling Rs 1 lakh crore in two auction tranches of Rs 50,000 crore on March 9 and March 13 to inject liquidity ahead of mid‑March advance tax outflows.
Why it matters
The auctions will force banks to decide whether to sell high‑quality liquid assets or preserve liquidity coverage ratios, making them less willing to supply bonds at low yields. That constraint raises uncertainty over bid levels and could limit the central bank's ability to absorb supply without moving short‑term yields.
Implications
- • Authorised dealer banks' treasury desks must pre‑position government securities and set OMO bid levels that balance immediate funding needs against potential LCR deterioration.
- • Money‑market desks at commercial banks must revise intra‑month funding plans to account for the temporary liquidity injections from the March OMO auctions.
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Source
Topics
Banking Regulation Capital Markets Monetary Policy Financial Services