(Bloomberg) -- India’s central bank plans to allow lending and borrowing of government bonds as it seeks to deepen the nation’s $1 trillion debt market.

“This will provide investors an avenue to deploy their idle securities, enhance portfolio returns and enhance wider participation,” Governor Shaktikanta Das said in Mumbai on Wednesday, after raising interest rates by a quarter point. Rules for securities lending and borrowing will be announced later, the central bank said.

The move comes after New Delhi unveiled its highest-ever borrowing program of 15.43 trillion rupees for the coming fiscal year in its February budget. Though it came slightly lower than market estimates, most traders see a supply overhang of bonds emerging unless the central bank steps in to clear it.

Yields rose on Wednesday, with the benchmark 10-year yield rising three basis points to 7.34% after the central bank kept its stance unchanged on the withdrawal of accommodation, thus not ruling out further rate hikes.

“This will add liquidity to the government bond market, aid price discovery and work towards a smooth transition of borrowing program of center and states,” Das said. The move will augment the existing market for ‘special repos,’ he said.

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