RBI Rejects Treasury Bill Bids Amid Tight Liquidity

The Reserve Bank of India (RBI) has rejected all bids for treasury bills at a recent auction due to higher yield demands from investors. This marks the second instance in over a year of such rejection, spurred by tight liquidity in the banking system influenced by tax payments.

The Reserve Bank of India on Wednesday rejected all bids for treasury bills in its latest auction. Investors had demanded yields 0.05-0.10 percentage points higher than recent auctions, driven by tight liquidity in the banking system, market participants said.

The rejection marks the second occurrence in over 13 months, with the last instance on February 21, 2025, when bids for 91-day and 182-day treasury bills were similarly rejected. "Tight liquidity has prompted investors to bid at higher cut-off yields, which the RBI did not accept," stated Balasubramanian R, head of treasury at Dhanlaxmi Bank.

This tight liquidity condition is attributed to outflows for advance tax and GST payments. The RBI, as a countermeasure, injected Rs 2.08 lakh crore into the banking system via variable rate repo auctions and is expected to continue these interventions to stabilize interest rates.

(With inputs from agencies.)