RBI accepts 77% of January government-security buyback bids
Reserve Bank of India (RBI), in its recent buyback auctions of government securities in January, accepted nearly 77% of the total amount the central bank had notified, but received bids worth about double the amount as banks bid aggressively amid deficit liquidity in the banking system, economists said.
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The auction received bids worth ₹45,710.2 crore, for a notified amount of ₹25,000 crore. The RBI accepted ₹19,217.5 crore. The central bank started conducting such buyback auctions in this fiscal year on May 9, after a gap of six years. Since then, it has conducted seven rounds of such auctions.
«The amount accepted is slightly less than the previous auctions because some bids may have been aggressive and higher than the governments' comfort levels. On the other hand, the total amount offered by banks could have been large as liquidity conditions continue to remain tight,» said Sakshi Gupta, principal economist at HDFC Bank. Banking system liquidity has been in deficit since December 16 and saw an average deficit of ₹87,985 crore in January. Deficit liquidity has primarily been a consequence of the central bank's intervention in the foreign exchange spot market to prevent excess volatility in the rupee's exchange rate. Buybacks are a way for the government to pay off debt for next fiscal year to reduce its gross borrowing.
