RBI Raises Trading Targets for Primary Dealers to Boost Bond Market Liquidity
New Delhi, May 15: The Reserve Bank of India (RBI) has increased trading targets for primary dealers in a move aimed at strengthening liquidity in the government securities market and deepening participation in sovereign debt trading.
The decision comes amid a broader push to improve market efficiency and support stable borrowing conditions for the government.
Higher Trading Mandates for Bond Dealers
The Reserve Bank of India (Reserve Bank of India) has raised the minimum trading requirement for each of the 21 primary dealers to ₹4 trillion in the financial year beginning April.
This marks a sharp increase of about 48% compared to the previous year’s targets, according to people familiar with the matter.
The targets were formally communicated to dealers in writing as part of the RBI’s annual operational guidelines.
Push to Deepen Sovereign Bond Liquidity
The move is designed to improve liquidity in the government bond market, especially in benchmark securities such as the 10-year government bond, which is widely used as a reference for pricing across the economy.
Market data shows that trading activity has already responded, with volumes in the 10-year bond rising sharply since April.
Daily trading in the benchmark security has increased significantly compared with the previous month, while overall bond market turnover has also seen an uptick.
Early Signs of Increased Market Activity
According to market estimates, trading in the 10-year bond has surged as much as 40% since April, while total bond trading volumes have risen around 15% over the same period.
The increase suggests that higher dealer obligations are already translating into more active participation in secondary markets.
RBI’s Broader Market Strategy
The RBI has been focusing on strengthening the government securities market as part of its broader financial market development strategy.
Governor Sanjay Malhotra has emphasized improving liquidity and resilience in sovereign debt markets, particularly in the face of external volatility from currency fluctuations and global oil price movements.
How the System Works
Primary dealers typically act as market makers for government securities, and their trading targets are linked to past average volumes.
By raising these benchmarks, the RBI aims to ensure deeper participation, better price discovery, and smoother absorption of government borrowing needs.
