RBI accepts 95% of bond buyback ahead of monetary policy review

Mumbai: The Reserve Bank of India (RBI) Thursday accepted 95% of the total amount notified in this fiscal year's first bond buyback a day ahead of the bi-monthly monetary policy review, although the bids received were not as large as those in similar exercises conducted in January this year.

The low enthusiasm comes in the run up to the monetary policy committee (MPC) meeting set on Friday, as the markets didn't seem too keen to sell short-term debt on expectations of profit booking in these assets in the future, money market traders said. Against a notified amount of ₹25,000 crore, the RBI received bids worth ₹27,256 crore, of which, the central bank accepted offers of ₹23,855 crore, data showed.

"The policy on Friday may alter prices, especially for short term bonds. Since this buyback auction was so close to the MPC, the market did not seem very enthusiastic to sell," said Gopal Tripathi, head of treasury, Jana Small Finance Bank. Buybacks are a way for the government to pay off debt for next fiscal year to reduce its gross borrowing. Bond buybacks also allow the RBI to infuse durable liquidity in the system.