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Informist, Wednesday, Mar. 25, 2026

 

--RBI did not accept any bids at T-bill auction 

--RBI rejects bids for 91-day T-bill at auction, first since Feb 20, 2025

--RBI rejects bids for 182-day T-bill at auction, first since Feb 20, 2025

--RBI rejects bids for 364-day T-bill at auction, first since May 13, 2015 

 

MUMBAI/NEW DELHI – The Reserve Bank of India rejected all bids for INR 350 billion of Treasury bills Wednesday, the first wholesale cancellation of such an auction in several years. While the rejection of bids for the 91-day and 182-day T-bills was the first since Feb. 20, 2025, the central bank had last rejected all bids for the 364-day T-bill more than a decade ago, in an auction held on May 13, 2015.

 

The government had notified that it would raise INR 150 billion through 91-day T-bills, INR 120 billion through 182-day T-bills, and INR 80 billion through 364-day T-bills Wednesday. The Centre may have forgone raising funds to maintain system liquidity, especially with its coffers flush with collections of advance tax and goods and services tax over the past 10 days, dealers said. 

 

"Though initially there was no expectation of such a thing happening, there was some chatter about the cancellation because of the delay in the result and this being the last auction," a dealer at a primary dealership said. The result of the T-bill auction is usually detailed by 1330 IST when it is held at 1030-1130 IST. "It would have been done (so) maybe because the government's cash balances are enough for the financial year." The current financial year ends Tuesday.

 

Nearing the end of the March quarter, mutual funds--which are usually the most aggressive bidders for Treasury bills--face a cash crunch as banks withdraw funds to deploy in credit offtake. Several mutual funds which participated are likely to have bid at much higher yields than market consensus, dealers said. An Informist Poll of 15 market participants had estimated cut-off yields on the 91-day T-bill, 182-day T-bill, and 364-day T-bill at 5.37%, 5.59%, and 5.70%, respectively.

 

"For all we know, certain people (large mutual funds) would have bid at a really high level," a dealer at a mutual fund said. "Let's say somebody might have bid one year (364-day T-bill) at 80 (5.80%). And that's when they (the RBI) decided not to give a negative yield signal, particularly on the short end of the curve." Some dealers speculated that some mutual funds gave the auction a miss amid tight liquidity conditions. The average net liquidity in the banking system has been in a deficit of INR 7.80 billion between Mar. 18, the date the previous T-bill auction was conducted, and Tuesday, according to data from the RBI.

Even at cut-off yields expected by market participants, the bid levels were quite high, dealers said. If the RBI had set a cut-off of 5.70% on the 364-day T-bill Tuesday, it would have been the highest since Jan. 28, which itself was the highest since mid-May. So far this month, the 10-year benchmark 6.48%, 2035 bond yield has risen around 21 basis points and the one-year overnight indexed swap rate by 46 bps owing to fears of inflation rising because of the war in West Asia. In such a scenario, the RBI is unlikely to be comfortable with short-term rates surging while it aims for transmission of the Monetary Policy Committee's most recent repo rate cut of 25 bps in December, dealers said. The rejection of all bids at the T-bill auction is seen as a "yield management signal" by the central bank, dealers said.

 

The rejection of bids is also seen as an indication that the Centre has a comfortable cash surplus and is confident of meeting its FY26 fiscal goals. Gaura Sen Gupta, chief economist at IDFC FIRST Bank, estimated the Centre's current cash surplus at around INR 4.50 trillion, as the government is likely to have exceeded the revised estimates for its National Small Savings Fund and other revenue sources for FY26. By the end of the month, the cash surplus is likely to settle at around INR 3.00 trillion, she said. At the press conference after the Monetary Policy Committee meeting in February, RBI Governor Sanjay Malhotra had also said the budgeted figures for government-run small savings schemes were conservative. 

 

"In the Union Budget (presented February), they (the Centre) were a little too pessimistic on revised numbers on the small savings collection," Sen Gupta said. "So they had pencilled in a very large cash drawdown and a very conservative small savings collection. ... The cancellation is telling us two things. One is cash surplus is better than what they had expected, which is the main thing. Second, there is no risk in terms of the fiscal deficit in absolute terms, because if there was some slippage, then they wouldn't have cancelled the T-bill (auction)."

 

On the technical front, the rejection of bids at the auction is unlikely to have any impact on bank-integrated and standalone primary dealerships' half-yearly success ratio mandates for T-bills, dealers said. Primary dealerships have already met their 40% half-yearly targets and would not risk depending on the last scheduled T-bill auction of the financial year to meet such requirements, they said.  End

 

Reported by Cassandra Carvalho and Aaryan Khanna

Edited by Rajeev Pai

 

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