03.11.202506:14:38UTC+00India’s RBI to Meet Banks, Dealers Amid Liquidity Strain

The Reserve Bank of India (RBI) is scheduled to convene a meeting with select primary dealers and banks on Tuesday, according to three traders familiar with the matter who spoke to Reuters. This meeting arises amidst growing concerns that tightening liquidity in the banking system is exerting pressure on the government bond market. Although the meeting lacks a formal agenda, the focus is expected to be on the current market conditions, as per the insights of the traders who preferred to remain anonymous due to the lack of authorization to communicate with the media.

Last Friday, the RBI opted not to proceed with an auction of 110 billion rupees (approximately $1.25 billion) in seven-year government securities, which resulted in a seven-basis-point decline in the benchmark bond yield. The traders suggest that the central bank might be apprehensive about the current yield levels. In recent weeks, the liquidity within the banking system has been swinging between surplus and deficit, impacting sentiments in the bond market. Notably, last month, RBI Governor Sanjay Malhotra remarked that there is potential for a reduction in bond yields.