Flush with liquidity, RBI is quietly buying bonds from the open market

Till November 22, the central bank bought Rs 4,300 crore of bonds

At a time when the banking system is flushed with liquidity, the Reserve Bank of India (RBI) is buying bonds from the secondary market on a regular basis — unannounced.

On Tuesday, banks parked Rs 3.05 trillion of excess money with the central bank, highest since the demonetisation days. To support this mammoth liquidity operation, the central bank needs bonds. These bonds are given to banks as collateral against their cash. The RBI’s bond holding at the end of June this year was about Rs 9.9 trillion. This is because in the financial year 2018-19 (FY19), the RBI did massive bond