RBI Bond Buys Fail to Curb Soaring Borrowing Costs
Overview
The Reserve Bank of India has injected over ₹5 lakh crore into the system since April 2025 through open market operations to suppress lending rates. Despite these substantial efforts, market borrowing costs remain stubbornly high, defying the central bank's liquidity management strategy and signaling persistent inflationary pressures or other market dynamics.
RBI's Liquidity Push Stalls
The Reserve Bank of India (RBI) has aggressively deployed over ₹5 lakh crore in liquidity through open market operations since April 2025. The objective was clear: to ensure ample funds within the financial system and thereby exert downward pressure on borrowing rates.
Rates Defy Injection
Despite this significant monetary infusion, a strategy more substantial than the combined purchases of the preceding five years, market borrowing rates show no indication of abating. This persistent upward pressure on rates suggests underlying economic factors are counteracting the RBI's liquidity management efforts. Investors and economists are watching closely to understand the durability of these elevated borrowing costs and the RBI's next steps.
