Data compiled by PTI from RBI showed that the Centre raised ₹13,65,000 crore from April 4, 2025, to February 13 this year by issuing government securities as part of its gross borrowing programme. In parallel, the RBI conducted Open Market Operations (OMO) purchase auctions totalling ₹6,39,203 crore, injecting durable liquidity into the banking system.
The large-scale purchases came amid sustained government borrowing, which typically absorbs liquidity from the banking system and exerts upward pressure on bond yields. from the secondary market, the central bank infused liquidity and helped maintain orderly market conditions, experts said.
The move helped cushion the banking system from liquidity tightness and prevented excessive hardening of yields despite heavy supply of government securities. It also ensured adequate funds in the system to support credit growth.
“RBI’s OMO purchases have been actively deployed to ensure adequate core liquidity, amid RBI’s USD sales at a time of capital outflows and INR depreciation pressures.
“Various tools deployed by RBI including OMO purchases have thus provided durable liquidity and, in the process, mitigated upward pressure from global market forces,” said Brijesh Shah, senior vice president, fixed income at Bandhan AMC.
Potential positive sentiment for capital flows around the recent India-US trade deal (thus reduced FX intervention), and deployment of other tools like FX swaps could also imply lesser need for OMOs ahead, he added.
The liquidity had been in the surplus mode for much of FY26, but for a few episodes of it swinging into deficit. The OMO purchase operations by the RBI intensified since December 2025, when liquidity started getting squeezed and fell in deficit mode.
The intervention by the RBI by giving liquidity to the banking system also helped money market rates to be contained and overnight rates to trade close to repo rate.
Since January 2025, the bond yields remained volatile due to various reasons such as geopolitical situations leading to rising crude oil prices, anticipation of end of rate cut cycle, and finally due to higher than expected gross borrowing numbers announced by the government for FY27 in the Union Budget.
The 10-year benchmark bond yield moved in the range of 6.30-6.70% between January 2025, and February 2026.
The government has planned to borrow ₹17.2 lakh crore for FY27 significantly higher than the market projection of ₹16.5-17 lakh crore, leading to sharp rise in yields on government securities.
However, on the other hand, the net borrowing by the government was ₹1.73 lakh crore, from ₹11.53 lakh crore, a jump of ₹20,000 crore.
According to the RBI data, government securities worth ₹5.47 lakh crore are lined up for maturities.
Government borrowings are a key determinant of interest rates in the economy, and a higher supply of bonds puts pressure on yields unless matched by strong demand from banks, insurers, and foreign investors.
