RBI Rejects All T-Bill Bids As March-End Liquidity Tightens

India’s weekly T-bill auction was scrapped on March 25, 2026 after investors sought higher yields, exposing sharp liquidity tightness before the March 31 year-end.

The Reserve Bank of India rejected all bids in the March 25, 2026 Treasury bill auction, halting the government’s planned short-term borrowing of ₹35,000 crore. The cancelled sale covered ₹15,000 crore of 91-day T-bills, ₹12,000 crore of 182-day T-bills and ₹8,000 crore of 364-day T-bills. Reports across Reuters, 

Financial Express and Business Standard said investors had demanded cut-off yields 0.05% to 0.10% above recent levels. The move came as banking liquidity tightened sharply ahead of March 31, forcing the central bank to avoid absorbing more cash from the system.

What Is The Issue Behind The T-Bill Rejection?

This was not a routine auction miss. It was a full rejection of bids across all three tenors. That meant the government did not raise the planned ₹35,000 crore, or about $3.72 billion, in that auction cycle. 

Reuters, published on March 25, 2026, said the move was expected to support banking system liquidity before the financial year-end. Financial Express, published the same day, reported that it was the second such rejection in over 13 months.

The core issue was liquidity. Banks were already dealing with tight cash conditions, and accepting higher-yield bids would have raised the government’s short-term borrowing cost while draining more funds from the system.

Why The Auction Was Cancelled?

Reuters reported on March 23, 2026 that India’s banking system liquidity had moved into a ₹659 billion deficit, after averaging a ₹2.50 trillion surplus between February 1 and March 15. 

The same report said the weighted average call rate rose to 5.35%, around 10 basis points above the policy rate. It also noted that about $20 billion of foreign exchange intervention in March had tightened rupee liquidity.

This backdrop helps explain why the central bank did not accept bids at elevated yields. Business Standard, published on March 25, 2026, said the rejection helped avoid signalling a sharp jump in short-end rates just days before year-end adjustments.

A related signal had already appeared earlier. LoansJagat, in a report published on February 28, 2026, said extra liquidity support was likely to wind down after March, warning of tighter money-market conditions. That now looks relevant to the auction shock. 

What Happened Earlier?

The last similar rejection came on February 21, 2025, when bids for 91-day and 182-day T-bills were turned down. 

Financial Express highlighted that the March 25, 2026 action was the first full rejection across all tenors in more than a year. Informist reported on March 25, 2026 that rejection of the 364-day T-bill was the first such instance since May 13, 2015.

What Stakeholders Said?

Reuters quoted Rajeev Pawar, treasury head at Ujjivan Small Finance Bank, saying the cancellation was welcomed by the market as liquidity was low. 

Financial Express quoted Balasubramanian R of Dhanlaxmi Bank, who linked the rejection directly to tight liquidity and higher investor yield demands.

Conclusion

The cancelled T-bill auction shows how tight March-end liquidity has become. It also shows investors are demanding higher returns even for the government’s shortest borrowing.