The Reserve Bank of India will meet select Primary Dealers and banks on Tuesday, three traders aware of the developments said Reutersamid concerns that tighter liquidity in the banking system is putting pressure on the government bond market.
The meeting, while without a formal agenda, is expected to focus on current market conditions, the traders said. They did not want to be named because they are not authorized to speak to the media.
The RBI on Friday canceled an auction of ₹11,000 crore of seven-year government bonds, leading to a seven basis point decline in benchmark bond yields.
“Within a few days, things have changed dramatically, and what we thought would be a continued bull run turned out to be a short-lived phenomenon, which must be worrying for them and could have led to the cancellation of Friday’s auction,” said one of the traders.
All traders said the central bank may be concerned about current interest rate levels. The RBI did not respond to any Reuters email looking for comment.
The liquidity of the banking system has fluctuated between surplus and deficit over the past two weeks, affecting bond market sentiment.
“The RBI is adamant that interest rates should be lower than what they are currently, and they have also taken steps like adjusting the supply calendar and convincing states to borrow less,” a second source said.
RBI Governor Sanjay Malhotra last month noted that there is scope for a decline in bond yields.
“A number of measures have been considered in this regard, including how the primary G-Sec auctions will be conducted. The tenor of this government offer is not just the central government but also the state government,” Malhotra said.
Published on November 3, 2025
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