RBI Sells 500 Billion Rupees in Bonds to Drain Liquidity Surplus
The Reserve Bank of India (RBI) has taken a significant step to drain excess liquidity from the banking system by selling 500 billion rupees in government bonds on September 17. This is the first net open market operation (OMO) debt sale in nearly nine years and marks a new approach for the RBI.
The RBI plans to sell another 250 billion rupees each on September 21 and 28, bringing the total planned absorption to 1 trillion rupees. The move comes as a result of the massive liquidity surplus, which currently stands at between 10.25 and 11 trillion rupees.
The surplus grew due to a special foreign-exchange mobilization scheme that attracted $127 billion in deposits from banks, pushing the RBI's forex reserves to record highs while converting those dollar inflows to rupees flooded the system with local currency.