The Reserve Bank of India has turned cautious after some liquidity-tightening measures aimed at increasing borrowing costs. Market experts said the central bank did not want interest rate to rise sharply as that could create more problems for the economy. RBI on July 18 rejected bids that quoted higher yields for its Rs 12,000-crore bond sale programme, netting a paltry Rs 2,532 crore.
It accepted bids worth Rs 777 crore and Rs 1,755 crore for 8.33 per cent 2026 and 8.97 per cent 2030 securities — at cut-off yields of 8.23 per cent and 8.54 per cent — respectively, as against secondary-market yields of 8.1 per cent and 8.37 per cent. Banks’ treasury heads said there were several bids but RBI accepted only those close to the secondary-market rates.
Despite receiving more than 113 and 76 bids for bonds with five- and 10-year tenures, RBI didn’t accept any bid. Even on July 17, the central bank had rejected all bids received at the auction of 91- and 180-day treasury bills, worth Rs 12,000 crore.
NS Venkatesh, Head (Treasury), IDBI Bank said that RBI didn’t want to give out any yield signal. It wants to use open-market operations (OMOs) as a pure liquidity-management tool. The message RBI wanted to send out was that it intended to suck out liquidity but not at the exorbitant level the market was demanding.