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Time of India
3 days ago
- Business
- Time of India
RBI to conduct 7-day VRRR for Rs 2.5 lakh crore today
Mumbai: The Reserve Bank of India ( RBI ) will conduct a seven-day variable rate reverse repo (VRRR) operation for ₹2.5 lakh crore on Friday, a day when two previous such operations involving a total of nearly ₹2 lakh crore would be reversed and returned to the banking system. Friday is also the end of the fortnight, when banks need to report their cash reserve ratio compliance to the Reserve Bank of India (RBI). Bank treasury officials said that the aim of this exercise is to keep weighted average call rate (WACR) and the TREPS rate within the liquidity adjustment facility (LAF) corridor. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Is it legal? How to get Internet without paying a subscription? Techno Mag Learn More Undo VRRR does not permanently remove liquidity, but increases cost of liquidity, thus pushing up overnight rates. The operations planned for Friday will be reversed on July 18, the next Friday. "The primary intent of the VRRR exercise is to keep overnight rates well within the LAF corridor, thereby supporting effective transmission of the recent policy rate cuts. The move also aligns with the RBI's operational objective of maintaining system liquidity surplus around 1% of NDTL, which works out to around ₹2.5 lakh crore," said V RC Reddy, head of treasury, Karur Vysya Bank .
Business Recorder
30-06-2025
- Business
- Business Recorder
India's short-end debt outperforms long-end for second straight quarter on dovish RBI
MUMBAI: India's shorter-duration government bonds outperformed its longer-duration counterpart for a second straight quarter as the country's central bank continued with liquidity infusion and slashed interest rates in April-June, traders said. The yield on the benchmark 10-year bond ended at 6.3241%, compared with its previous close of 6.3134%. The 10-year bond yield eased 26 basis points in April-June, after declining 18 bps in January-March. Meanwhile, the five-year 2029 bond yield ended at 6.0013%, down 45 bps in this quarter after plunging 26 bps in January-March. 'The yield curve steepened due to a comfortable liquidity situation, but with the rate cut cycle likely behind us, the next quarter seems tough,' said VRC Reddy, treasury head at Karur Vysya Bank. The Reserve Bank of India continued infusing funds into the banking system through debt purchases and bought bonds worth 2.39 trillion rupees ($27.89 billion) in April-May, which was followed by the government buying 495 billion rupees of bonds in June. Indian bonds post biggest monthly dip since April 2024 on change in RBI policy stance The RBI also slashed repo rate by 75 bps in the quarter, including a larger-than-expected 50 bps in June. However, the plunge in the shorter end was partly reversed as the central bank changed monetary policy stance to neutral from accommodative after delivering the June rate cut, and also started operations to suck out liquidity from the banking system. This led to many analysts believing that rate-cut cycle has ended, even as Governor Sanjay Malhotra said in an interview that inflation below the central bank's current projections could open up policy space. Non-confirmist ultra-long end Even as the majority of bond yields witnessed a downtrend, the yields on the above 30-year bonds rose, after weak demand from insurance companies and continuous heavy supply. This has led to increased calls for a tweak in supply calendar, with a reduction in ultra-long bonds and increase in up to seven-year papers. 'We expect the demand will come back as the absolute level of yield becomes attractive. Further, remedial measures can be in terms of reduction in supply through reduction in long-term bond auctions,' said Sachin Bajaj, executive vice president and chief investment officer, Axis Max Life Insurance.
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Business Standard
26-06-2025
- Business
- Business Standard
RBI bond holdings hit record high, may ease in months ahead, say traders
The Reserve Bank of India's (RBI) holdings of Indian government securities climbed to a record in absolute terms following aggressive debt purchases, but analysts anticipate a reduction as the year progresses. The RBI's bond holdings rose to 12.78per cent of the outstanding issuances as of March-end from 10.55per cent at December-end, according to central bank data released on Wednesday. In absolute terms, this amounts to approximately 14.88 trillion rupees ($173.55 billion), a record high, marking an increase of 2.83 trillion rupees in the January-March quarter. The central bank had purchased bonds worth 2.45 trillion rupees via open market operations (OMOs) and an additional 388 billion rupees through secondary market transactions in the quarter. Analysts noted that the RBI's holdings might diminish in the coming months as some of the debt matures. The central bank holds between 500 billion rupees to 1 trillion rupees of securities that mature in this financial year. "Holdings may further go up for the current quarter, but in most cases, OMOs are now behind us, especially after the central bank announced a reduction in cash reserve ratio and a reverse repo," said VRC Reddy, treasury head at Karur Vysya Bank. The RBI aims to keep liquidity above 1per cent of deposits till March 2026, according to Gaura Sen Gupta, chief economist with IDFC First Bank. To that end, it announced a 100 basis-point reduction in banks' cash reserve ratio, effective from September to December, in its policy meeting in June. The RBI also cut its repo rate by 50 basis points and shifted its policy stance to neutral. "In our base case, we do not expect more OMO purchases" for the rest of this financial year, Sen Gupta said. The central bank will also conduct a seven-day variable rate reverse repo auction for 1 trillion rupees on Friday. Market participants see this as part of the RBI's strategy to align the weighted average call rate closer to the repo rate, which will further tweak liquidity. If growth undershoots the RBI's expectation, they may choose to loosen the liquidity valve, said Dhiraj Nim, an economist and FX strategist at ANZ Research. Sen Gupta noted that additional OMO purchases would likely depend on significant capital outflows. "For now, in our base case, we expect balance of payments to be a small surplus in fiscal 2026," she said.
Reuters
26-06-2025
- Business
- Reuters
India cenbank's bond holding climbs to record, could ease in months ahead, say traders
MUMBAI, June 26 (Reuters) - The Reserve Bank of India's (RBI) holdings of Indian government securities climbed to a record in absolute terms following aggressive debt purchases, but analysts anticipate a reduction as the year progresses. The RBI's bond holdings rose to 12.78% of the outstanding issuances as of March-end from 10.55% at December-end, according to central bank data released on Wednesday. In absolute terms, this amounts to approximately 14.88 trillion rupees ($173.55 billion), a record high, marking an increase of 2.83 trillion rupees in the January-March quarter. The central bank had purchased bonds worth 2.45 trillion rupees via open market operations (OMOs) and an additional 388 billion rupees through secondary market transactions in the quarter. Analysts noted that the RBI's holdings might diminish in the coming months as some of the debt matures. The central bank holds between 500 billion rupees to 1 trillion rupees of securities that mature in this financial year. "Holdings may further go up for the current quarter, but in most cases, OMOs are now behind us, especially after the central bank announced a reduction in cash reserve ratio and a reverse repo," said VRC Reddy, treasury head at Karur Vysya Bank. The RBI aims to keep liquidity above 1% of deposits till March 2026, according to Gaura Sen Gupta, chief economist with IDFC First Bank. To that end, it announced a 100 basis-point reduction in banks' cash reserve ratio, effective from September to December, in its policy meeting in June. The RBI also cut its repo rate by 50 basis points and shifted its policy stance to neutral. "In our base case, we do not expect more OMO purchases" for the rest of this financial year, Sen Gupta said. The central bank will also conduct a seven-day variable rate reverse repo auction for 1 trillion rupees on Friday. Market participants see this as part of the RBI's strategy to align the weighted average call rate closer to the repo rate, which will further tweak liquidity. If growth undershoots the RBI's expectation, they may choose to loosen the liquidity valve, said Dhiraj Nim, an economist and FX strategist at ANZ Research. Sen Gupta noted that additional OMO purchases would likely depend on significant capital outflows. "For now, in our base case, we expect balance of payments to be a small surplus in fiscal 2026," she said. ($1 = 85.7400 Indian rupees)
Business Recorder
26-06-2025
- Business
- Business Recorder
India central bank's bond holding climbs to record, could ease in months ahead, say traders
MUMBAI: The Reserve Bank of India's (RBI) holdings of Indian government securities climbed to a record in absolute terms following aggressive debt purchases, but analysts anticipate a reduction as the year progresses. The RBI's bond holdings rose to 12.78% of the outstanding issuances as of March-end from 10.55% at December-end, according to central bank data released on Wednesday. In absolute terms, this amounts to approximately 14.88 trillion rupees ($173.55 billion), a record high, marking an increase of 2.83 trillion rupees in the January-March quarter. The central bank had purchased bonds worth 2.45 trillion rupees via open market operations (OMOs) and an additional 388 billion rupees through secondary market transactions in the quarter. Analysts noted that the RBI's holdings might diminish in the coming months as some of the debt matures. The central bank holds between 500 billion rupees to 1 trillion rupees of securities that mature in this financial year. 'Holdings may further go up for the current quarter, but in most cases, OMOs are now behind us, especially after the central bank announced a reduction in cash reserve ratio and a reverse repo,' said VRC Reddy, treasury head at Karur Vysya Bank. Indian bonds flat as sell-off stalls after pricing in RBI liquidity plan The RBI aims to keep liquidity above 1% of deposits till March 2026, according to Gaura Sen Gupta, chief economist with IDFC First Bank. To that end, it announced a 100 basis-point reduction in banks' cash reserve ratio, effective from September to December, in its policy meeting in June. The RBI also cut its repo rate by 50 basis points and shifted its policy stance to neutral. 'In our base case, we do not expect more OMO purchases' for the rest of this financial year, Sen Gupta said. The central bank will also conduct a seven-day variable rate reverse repo auction for 1 trillion rupees on Friday. Market participants see this as part of the RBI's strategy to align the weighted average call rate closer to the repo rate, which will further tweak liquidity. If growth undershoots the RBI's expectation, they may choose to loosen the liquidity valve, said Dhiraj Nim, an economist and FX strategist at ANZ Research. Sen Gupta noted that additional OMO purchases would likely depend on significant capital outflows. 'For now, in our base case, we expect balance of payments to be a small surplus in fiscal 2026,' she said.
