India's central bank to sell $2.6 billion in bonds
The Reserve Bank of India (RBI) announced on October 9 that it would sell 250 billion rupees, approximately $2.58 billion, in government bonds on Tuesday, October 13, to reduce excess liquidity in the banking system.
The central bank will also increase banks' daily cash reserve maintenance requirement from 90% to 99% of the prescribed level, effective October 16.
The new development is the RBI's announcement of concrete liquidity-tightening measures following its interest rate increase. Average daily surplus liquidity in the banking system has exceeded 7 trillion rupees since early September.
Bond sales and tighter reserve requirements could reduce excess cash and tighten short-term financing conditions.
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