RBI Rejects All T‑Bill Bids to Preserve Liquidity

Date of action: 28 Mar 2026
Action: RBI rejected all bids in a Treasury Bill (T‑Bill) auction.
Liquidity surplus avoided: Rs 35,000 crore.
Objective: Ensure banks have sufficient cash at the FY‑end and avoid a rise in T‑Bill yields.
Tenors of Indian T‑Bills: 91 days, 182 days, 364 days.
Minimum bid size: Rs 10,000 (in multiples of Rs 10,000).
Primary buyers: Commercial banks, insurance companies, mutual funds (retail investors can now bid via RBI Retail Direct).
Nature of T‑Bills: Zero‑coupon securities issued at a discount and redeemed at par.
Regulatory link: Holding T‑Bills helps banks meet their Statutory Liquidity Ratio (SLR).

Treasury Bills are short‑term debt instruments issued by the Central Government to manage temporary cash‑flow mismatches.
The RBI conducts the auction on behalf of the government and uses the instrument as a key Open Market Operation (OMO) tool.
At the end of the financial year (31 Mar 2026), excess liquidity can lead to price volatility, higher yields, and strain on the banking system’s settlement obligations.
By rejecting high‑interest bids, RBI avoided a yield spike that could have “spooked” the market and increased borrowing costs for the government.

Liquidity Management: Demonstrates RBI’s proactive stance in absorbing surplus liquidity, complementing other tools like Repo Rate adjustments, CRR/SLR changes, and government securities open market operations.
Financial Stability: Ensures banks have adequate cash to meet settlement and payment obligations during the critical year‑end period, reducing systemic risk.
Cost of Borrowing: Prevents an inadvertent rise in Treasury yields, which would raise the cost of government borrowing and potentially affect fiscal deficit financing.
Market Confidence: Signals to market participants that RBI will intervene to maintain orderly conditions, supporting price stability in the money market.

Reserve Bank of India Act, 1934 (Amendment) – Section 7(1): Empowers RBI to conduct open market operations, including the issuance and purchase of government securities.
Banking Regulation Act, 1949 – Section 31: Mandates banks to maintain SLR, part of which can be satisfied by holding T‑Bills.
Government of India (Allocation of Funds) Act, 1960: Provides the legal framework for the issuance of Treasury Bills on behalf of the Central Government.