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The Reserve Bank of India unexpectedly ordered the bankers to deposit additional funds in the central bank on Saturday to absorb the additional liquidity that the government has imposed on large paper money.

India on November 8 announced 500 and 1,000 rupees out of circulation in order to combat tax evasion and currency fraud, then some of the Indians to the old coins to the bank.

Banks have used part of their money to buy bonds, pushing bond prices higher, with the benchmark 10-year Treasury yield falling more than 50 basis points to more than seven and a half years.

The central bank said banks would need to transfer deposits taken between September 16 and November 11 to 100 percent of the central bank's reserve requirement ratio (CRR), saying it was a temporary measure, Day or before.

Traders said the move was meant to dampen the rally in the bond market and said the central bank could have adopted a more moderate measure, such as selling market-stabilizing bonds or requiring banks to store funds in reverse repo operations to absorb part of the liquidity.

The move may also ease market expectations, the central bank will be held on December 7, the next policy meeting to cut interest rates by 25 basis points. The central bank meeting in October has cut interest rates by 25 basis points.

Reuters estimates that the move may absorb more than 3.24 trillion rupees ($ 47.29 billion) from banks.

Treasurys may be up 8-10 basis points on Monday, with banking stocks down, given that the central bank's move will deprive major sources of funding over the past two weeks.

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