RBI Rejects T-Bill Bids, October 21, 2026: All Three Bills Scrapped as Short-Term Yields Surge

When the RBI rejects T-bill bids, the bond market pays attention. On Wednesday, October 21, 2026, the central bank accepted nothing at the government’s weekly treasury bill auction. The plan was to raise ₹23,000 crore through 91-day, 182-day and 364-day bills. The RBI’s cut-off release shows no cut-off price for any of the three and a face value accepted of nil across the board.

It wasn’t for lack of money. Investors were willing to lend. They just wanted a higher rate than the RBI was prepared to pay.

RBI rejects T-bill bids: what the auction data shows

The full auction result lays out the demand. Competitive bids came to ₹15,366.6 crore for the 91-day bill against ₹8,000 crore on offer, ₹18,925.5 crore for the 182-day bill against ₹8,000 crore, and ₹11,352.5 crore for the 364-day bill against ₹7,000 crore. That’s roughly 1.9, 2.4 and 1.6 times the notified amounts. Another ₹15,425 crore or so came in as non-competitive bids. None of it was accepted.

The RBI didn’t give a reason in its release. Dealers quoted by Business Standard read it as discomfort with how fast short-term borrowing costs have climbed. The yields investors asked for were probably above what the RBI was willing to accept. The last time it happened was in June, when the 182-day and 364-day auctions were cancelled. At the end of March, bids were rejected across all three maturities.

The climb has been steep. At the October 14 auction, the government sold all three bills in full at implicit yields of 5.7281% (91-day), 6.2896% (182-day) and 6.4891% (364-day). Business Standard reports that between September 9 and October 14, cut-off yields rose by 64, 83 and 69 basis points on the 91-day, 182-day and 364-day bills respectively. If basis points are new to you, our explainer on basis points walks through them.

Put that 364-day yield next to the policy repo rate of 5.50% and the gap is about 99 basis points. Business Standard says that is the widest in four years.

Bond yields and the policy backdrop

Government bonds were already under pressure from rising crude and US Treasury yields. After the auction result, the benchmark 10-year G-Sec yield settled at 7.44%, against 7.39% the previous day, its highest since November 4, 2022, per Business Standard. A primary dealer quoted in the same report expects it to drift towards 7.50%, with Brent trading around $112 a barrel.

The RBI has turned hawkish. Business Standard notes it raised the repo rate to 5.50% this month and moved its stance to calibrated tightening, and that bets on a 50 bps hike in December are growing. The RBI’s own money market data shows the corridor around that rate: the marginal standing facility (MSF) at 5.75% and the standing deposit facility (SDF) at 5.25%.

Liquidity has tightened quickly

Bank liquidity is the other half of this story. On October 20, the RBI was still absorbing a net ₹48,304 crore from the system, a thin surplus. A 7-day variable rate repo (VRR) of ₹1,00,014 crore from October 19 was outstanding. At the overnight VRR on October 21, banks bid ₹93,241 crore for ₹50,000 crore. The RBI allotted ₹50,007 crore at a cut-off of 5.52%. The weighted average call rate settled at 5.64%, close to the MSF rate, according to Business Standard.

The RBI has announced another ₹50,000 crore overnight VRR for Thursday, October 22, with the window open from 9:30 to 10:00 AM.

What it means for markets

The message is that the RBI doesn’t want short rates running too far ahead of the repo rate, even while it’s tightening. Watch next Wednesday’s T-bill cut-offs, the 10-year yield around 7.5% and the daily VRR demand. For how these bills are priced in the first place, see our guide to treasury bills in India, and for why long bonds move more than short ones, our piece on bond duration.

Disclaimer: This article is for information and education only and is not investment advice. Please do your own research or consult a SEBI-registered adviser before making any investment decision.