India's state-run banks to lower bond purchases as liquidity tightens, treasury officials say

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Watch onMUMBAI - India's state-owned banks will slow government bond purchases in the weeks ahead as banking system liquidity tightens, treasury officials from nine state lenders said.

India's benchmark 10-year bond yield rose to a seven-month high of 7.40% on Monday, rising from a two-month low of 7.07% hit on Sept. 22. It was at 7.31% at 2:10 p.m. IST on Friday. Banking system liquidity - the quantum of funds in the interbank market - has largely been in deficit from the middle of September.

The RBI's focus on bringing inflation close to its target of 4% means yields won't fall much, lowering the chances for booking profits.

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