India cancels sale of treasury bills worth Rs 26,000 crore…
The bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india (RBI) on thursday did not accept any bids in the auction of 91 and 182-day treasury bills (T-bills). This step has been taken amid cash crunch in the country's banking system. RBI said in a statement that it rejected bids for the sale of Rs 26,000 crore, about $3 billion. However, it sold 364-day treasury bills worth Rs 7,000 crore at a rate of 6.5638 percent.
Lack of liquidity in the banking system
The liquidity (cash) situation in India's banking system is still severely in deficit, even though RBI has recently taken cash injection steps. But, according to an index by Bloomberg Economics, banks have borrowed about Rs 2 lakh crore from the central bank as of Wednesday.
RBI's measures to increase liquidity
Since the end of last month, the RBI has added Rs 1 lakh crore to the system through three open market operations (OMOs). In addition, it has injected liquidity equivalent to $5 billion through forex swaps and is also conducting variable repo auctions of long-term T-bills. At the same time, after the results of the T-bills sale on thursday, the 5-year bond remained steady at 6.65 per cent.
RBI's previous move
In May, the RBI announced lower borrowings for the government through treasury bills. This move was taken a few days before transferring a large dividend to the government. This payment to the government usually improves liquidity in the banking system over time.
Indian economy will remain the fastest growing
According to the latest monthly bulletin of RBI, India's economy will remain the world's fastest growing major economy even in 2025-26. Citing estimates from the international Monetary Fund (IMF) and the World bank, the RBI has said that India's GDP growth is expected to be between 6.5 per cent and 6.7 per cent in 2025-26. Despite global uncertainty, high-frequency indicators are showing that economic activity will improve in the second half of 2024-25, which will continue going forward.
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