According to a Bloomberg report, the Reserve Bank of India (RBI) has sold Rs 34 billion (USD 406 million) worth of bonds in the secondary market. This action is likely aimed at absorbing excess cash in the banking system due to inflows into the nation’s debt after its inclusion in a global index.

According to a Bloomberg report, RBI made these bond sales over four days. The foreign investments in local bonds exceeded USD 1 billion in July after India’s bonds were included in JPMorgan Chase & Co.’s emerging market bond index late last month.

This has increased local rupee liquidity, and RBI has absorbed the inflows to boost reserves. As a result, the RBI added USD 9.7 billion to its reserves that week.

India’s entry into the index as its 25th market in June 2005 is a significant development. This move is expected to usher in substantial global investments of USD 20 billion to USD 25 billion into the Indian bond market.

According to data from the Reserve Bank of India, India’s foreign exchange reserves have decreased by more than USD 2 billion from their peak.

Traders eagerly await Tuesday’s India’s Union budget announcement to evaluate the government’s borrowing plan for the current fiscal year. The government aims to raise 14.1 trillion rupees through bond sales in the financial year that began on April 1.

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