RBI’s share of outstanding government bonds rising, bond yields likely to remain within a range: SBI report

According to a recent report by the State Bank of India (SBI), the Reserve Bank of India’s (RBI) share of outstanding government bonds (G-secs) has increased noticeably over the past year.

The report said that the RBI’s stake increased to 14.2 percent in June 2025, compared to 11.9 percent in June 2024 and 10.6 percent in December 2025. It stated, “RBIs’ share of outstanding government bonds increased from 11.9 percent in June 2024 to 14.2 percent in June 2025 and 10.6 percent in December 25.”

In contrast, the share of banks has decreased, while the share of insurance companies has remained largely unchanged over the same period. The report notes that the central government is expected to borrow around ₹1.00 lakh crore every month till February 2026, with only a small amount planned for March. At the same time, relatively large State Development Loan (SDL) issues are likely to compete with short-term government loans.

Given this supply scenario, the report opined that bond yields could remain within a range and move sideways in the coming days. While banks and mutual funds have been net sellers of G-secs in recent months, the ‘Others’ category has emerged as the top buyer, absorbing the supply in the market.

The report also highlighted the RBI’s activity in the foreign exchange market. The central bank intervened against its comfortable foreign exchange reserves to curb excessive speculation and defend the rupee.

Between June and August 2025, net foreign exchange sales were around $14 billion, translating into a permanent liquidity withdrawal from the banking system worth ₹1.2 lakh crore. India’s foreign exchange reserves, which stood at $703 billion in June 2025, fell to $690 billion at the end of October.

Excluding gold and special drawing rights (SDRs), reserves fell by $30 billion over the same period, from $599 billion to $569 billion. With the rupee trending downwards, the report suggested that the RBI’s intervention was likely to continue beyond August and could have surpassed these figures by now.

It also added that the recent round of RBI’s Open Market Operations (OMOs) in the secondary market could be a tactical move to inject permanent liquidity to compensate for the liquidity drained due to currency interventions.

The report also notes that the RBI has shifted part of its intervention strategy to the Non-Deliverable Forward (NDF) markets instead of spot market operations as this approach helps manage currency volatility without impacting the liquidity of the banking system.

Published on November 17, 2025