The Reserve Bank of India (RBI) has stepped up its efforts to pull surplus cash out of the banking system. On October 13, it sold the full 250 billion rupees ($2.6 billion) of bonds it had offered across six securities. It had announced on October 9 that banks must also hold more of their mandated cash reserves with it each day.
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RBI OMO Auction Result: Full ₹25,000 Crore Sold
In an open market operation (OMO), the central bank sells government securities to banks and other participants, absorbing cash from the system. The RBI accepted bids for the entire notified amount. Cut-off yields rose with maturity, from 7.1428% on the 2030 bond to 7.3947% on the 7.18% 2033 bond. Two securities, the 7.18% GS 2033 and the 6.10% GS 2031, accounted for about 71% of the total. No bids were accepted for the 7.10% GS 2034. Detailed results, including total bids received, are yet to be released.
Auction Result at a Glance
| Security | Accepted (₹, crore) | Cut-off yield (%) | Cut-off price (₹) |
| 7.88% GS 2030 | 2,820 | 7.1428 | 102.20 |
| 6.10% GS 2031 | 8,430 | 7.2236 | 95.54 |
| 7.95% GS 2032 | 1,600 | 7.2659 | 103.21 |
| 7.26% GS 2033 | 2,735 | 7.3413 | 99.58 |
| 7.18% GS 2033 | 9,415 | 7.3947 | 98.85 |
| 7.10% GS 2034 | Nil | – | – |
| Total | 25,000 |
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Stricter Daily CRR Maintenance From October 16
The second measure targets how banks manage their reserves. Lenders must keep at least 99% of their required cash reserves with the RBI every day during a fortnight, up from 90% at present. The change takes effect on October 16. Because the rule is framed as 99% of the prescribed cash reserve ratio (CRR), the change is to daily maintenance rather than the ratio itself. That leaves banks less room to run low balances on some days.
Why the RBI Is Draining Liquidity
Surplus liquidity weakens the effect of policy rate changes. The move follows the RBI’s first key policy rate hike in almost four years, and the aim is to ensure that the hike feeds through to lending and deposit rates. Excess liquidity stood at around ₹3.88 lakh crore earlier in October. It is not the first such step: the RBI also sold ₹25,000 crore of bonds on September 28.
What It Means for Banks, Bond Yields, and Borrowers
- Bond yields: Investors often demand higher yields to absorb a sudden increase in government securities supply, and less free cash at banks further dampens demand.
- Money market rates: Overnight call money rates have already risen to 5.43%.
- Bank funding: Lenders will have less idle cash and may lean more on the central bank’s policy rates.
- Borrowers and depositors: Tighter liquidity could lift borrowing costs over time. It may also improve deposit rates as banks compete for funds.
Outlook: More Liquidity Tightening Likely
The RBI is using a mix of tools rather than one blunt instrument. Repeated OMO sales, combined with a stricter CRR maintenance rule, show a central bank intent on aligning market rates with its policy stance. The detailed results will show how strong demand was, and banks’ reserve management after October 16 will show how tight conditions are becoming.
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