- The RBI plans to conduct open market sales of bonds to manage liquidity in the banking system. The specific timing and quantity of these bond sales will be determined based on prevailing conditions.
- At present, India’s core liquidity, which includes the government’s cash balances held with the central bank, is in a surplus ranging from 3 trillion to 3.5 trillion rupees.
- The lack of clarity regarding the RBI’s plans for bond sales has created uncertainty for bond investors, leading to increased bond yields.
- The RBI aims to maintain a certain level of surplus liquidity in the banking system to support productive sectors of the economy. Open market operations (OMOs) will only be conducted when there is a durable surplus and will be need-based.
- Bond sales by the RBI, triggered when there is a surplus of liquidity, may lead to inflationary pressures in the economy, and this will be monitored closely.