New Delhi:
The Reserve Bank of India (RBI) has significantly raised trading targets for the country’s primary dealers in an effort to improve liquidity in the government bond market, according to people familiar with the matter.
Under the revised framework, each of the 21 primary dealers has been asked to trade a minimum of Rs 4 trillion worth of bonds during the financial year beginning April 2026. The target marks a sharp increase of nearly 48 per cent compared to the previous year’s requirement.
People aware of the development said the RBI communicated the revised targets to primary dealers through written notifications issued at the start of the financial year.
The move appears to have already impacted trading activity in India’s sovereign debt market, particularly in the benchmark 10-year government bond, which is considered the country’s most actively traded debt security.
According to Bloomberg data, daily trading volumes in the 10-year benchmark bond have risen nearly 40 per cent since April compared to March levels. Overall bond market trading volumes also increased around 15 per cent during the same period.
The RBI’s decision reflects a broader effort to deepen liquidity and improve participation in India’s government securities market amid ongoing volatility in global financial conditions.
Governor Sanjay Malhotra had earlier highlighted the importance of improving liquidity in sovereign debt markets, especially at a time when investors are navigating fluctuations in crude oil prices, currency movements and changing global interest rate expectations.
Market participants believe the higher trading targets could help sustain stronger volumes throughout the year, potentially making the bond market more resilient to external shocks.
Primary dealers play a crucial role in India’s debt market ecosystem. They act as intermediaries between the RBI and investors, participate in government bond auctions, and help maintain liquidity in the secondary market by actively buying and selling securities.
The RBI typically assigns annual trading targets to primary dealers at the beginning of every financial year as part of its operational guidelines. These targets are generally calculated based on a percentage of average trading volumes recorded over the previous three years.
Analysts say the latest increase signals the central bank’s intention to encourage more active participation and tighter bid-ask spreads in the sovereign debt market.
The development also comes at a time when India’s bond market is attracting increased attention from foreign investors following the inclusion of Indian government bonds in major global bond indices.
An RBI spokesperson did not respond to requests for comment on the matter. The Primary Dealers’ Association of India also did not immediately issue an official response.