The Reserve Bank of India said it would sell 220 billion rupees ($3.6 billion) of short-term cash management bills every week on Mondays. Next week, it will sell 110 billion rupees each of 35-day and 34-day bills.
The move, aimed at draining cash from the banking system, comes after the Indian rupee Tuesday fell to a new low of 61.80 to the dollar, erasing the previous low of 61.21 set on July 8. Thursday, the rupee was trading at 60.88 and is down nearly 12% against the U.S. currency since early May.
The sale is in addition to 120 billion rupees of Treasury bills and 150 billion rupees of sovereign bonds the government sells every week to fund its fiscal gap. The sale of cash management bills is likely to push yields of short-term debt higher.
At least two nonstate lenders, HDFC Bank Ltd. and Yes Bank Ltd., have increased the minimum interest rates they charge borrowers. HDFC Bank, Yes Bank and Axis Bank Ltd. have also increased some deposit rates to attract funds after the RBI in July capped the funds banks could borrow from the central bank at its policy rate of 7.25%.
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