RBI's Share In G-Sec Rises As Bond Yields Stay Rangebound, Says SBI Report

The Reserve Bank of India (RBI) has increased its share in outstanding government securities over the last year. RBI's share rose from 11.9 per cent in June 2024 to 14.2 per cent in June 2025, according to a report by the State Bank of India.

During this period, the share of the lenders declined while that of insurers remained largely unchanged. The report further said banks and mutual funds were net sellers of government securities (G-Secs) in recent months, with significant absorption happening in the 'others' category.

In the report, the bank said that the Central government is likely to borrow around Rs 1 lakh crore every month until February 2026, with a smaller amount expected in March. The bank added that this borrowing pattern along with the state development loan supply is expected to keep bond yields rangebound in the near term. According to the report, liquidity conditions have been affected by the operations of RBI in the foreign exchange market. 

The net sale of foreign currency was about $14 billion between June and August 2025. This resulted in a withdrawal of about Rs 1.2 lakh crore of permanent liquidity from the banking system. The rupee continued to show a depreciating trend, and the report stated that intervention beyond August may have continued. 

This was reflected in the foreign exchange reserves. Reserves, which were at $703 billion in June 2025, slipped to $690 billion by the end of October. Excluding gold and Special Drawing Rights, reserves went down from $599 billion to $569 billion, thus recording a core reserve decline of $30 billion. 

The report said that RBI has recently conducted open market operations in the secondary market to inject permanent liquidity. These operations were described as a step taken to balance the liquidity impact of forex interventions. The report also mentioned that RBI has shifted part of its intervention strategy to the Non-Deliverable Forward market rather than relying mainly on spot operations.