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The Reserve Bank of India (RBI) has announced a buyback auction of government securities worth INR 20,000 crore, scheduled for next week, as part of its liquidity management measures. The auction will be conducted through the RBI's E-Kuber platform using the multiple price method. The move comes at a time when surplus liquidity in the banking system has declined sharply following Goods and Services Tax (GST) outflows. Alongside the buyback, the central bank has been conducting variable rate repo (VRR) auctions to inject short-term liquidity and maintain stability in the money markets.
The Reserve Bank of India (RBI) has announced that it will conduct a buyback auction of government securities worth INR 20,000 crore next week, as part of its ongoing liquidity management operations. According to a notification issued by the central bank, the auction is scheduled to be held on July 28 between 10:30 AM and 11:30 AM through the RBI's Core Banking Solution platform, E-Kuber.
Under the buyback programme, the government will repurchase select government securities, including 7.33 per cent GS 2026, 5.74 per cent GS 2026, 8.15 per cent GS 2026 and 8.24 per cent GS 2027. However, the RBI has not specified the amount that will be bought back under each individual security, and has instead fixed an overall buyback limit of INR 20,000 crore.
The central bank said the auction will be conducted using the multiple price method, under which successful participants receive the price they individually bid rather than a uniform cut-off price. Government security buybacks are commonly used by the RBI and the government to manage public debt, improve market liquidity and smooth the redemption profile of maturing securities.
The announcement comes at a time when surplus liquidity in the banking system has reduced significantly following Goods and Services Tax (GST) payments, which temporarily absorbed funds from the banking system and tightened short-term liquidity conditions.
Banking system liquidity surplus stood at around INR 2,884.18 crore in recent days, down sharply from INR 9,289.18 crore recorded a day earlier. The decline has put pressure on short-term money market rates, prompting the RBI to continue taking measures to ensure adequate liquidity in the financial system.
To address the temporary liquidity shortage, the RBI has been conducting Variable Rate Repo (VRR) auctions, which allow banks to borrow funds from the central bank against government securities for short durations. These operations are aimed at injecting temporary liquidity without changing the broader monetary policy stance.
So far, the RBI has conducted 12 VRR auctions, infusing INR 3,50,625 crore of short-term liquidity into the banking system. The latest government securities buyback is expected to complement these measures and help maintain orderly liquidity conditions while supporting the efficient functioning of the government securities market.
Source PTI
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