RBI's Bond Purchases: Balancing India's Banking Liquidity

To support liquidity, the Reserve Bank of India purchased 47% of government bonds issued in FY26. This move countered the inflationary pressure of heavy government borrowing, maintaining stable liquidity and bond yields in the banking system, while supporting credit growth despite volatile market conditions.

The Reserve Bank of India (RBI) has strategically purchased government securities amounting to 47% of the Centre's total bond issuances for FY26 in a bid to support liquidity in the banking system, according to publicly available data. The Centre had raised Rs 13,65,000 crore by issuing government securities from April 2025 to February 2026.

In response to sustained government borrowing which tends to absorb liquidity and elevate bond yields, the RBI conducted Open Market Operations (OMO) totaling Rs 6,39,203 crore. These operations injected durable liquidity, ensuring that the banking system remained cushioned against major liquidity crunches, maintaining stable market conditions.

Expert analysts suggest that these RBI interventions, particularly amid capital outflows and INR depreciation pressures, helped mitigate global economic pressure on the domestic market. Although recent geopolitical and budget announcements induced volatility in bond yields, the RBI's measures ensured the system's resilience and promoted credit growth.

(With inputs from agencies.)