India is considering a proposal to reduce treasury-bill sales next quarter as short-term borrowing costs surge, people with knowledge of the matter said. The government may avoid incremental borrowing via the bills and only borrow to meet its previous repayment needs in the next quarter, the people, asking not to be identified as they aren’t authorized to speak to the media, said.

Another option is to cancel sales if the yields demanded by investors are too high, they said. Borrowing costs at treasury-bill auctions have surged to the highest in more than three years amid tight banking liquidity and the recent spate of front-loaded rate hikes by the Reserve Bank of India.

The 91-day t-bill yield came at 6.4764% at last week’s sale, the highest since May 2019.

It is up 264 basis points this fiscal year. The government is comfortable with the yield being within 7.5% for the benchmark 10-year bond, one of the people said.

It doesn’t plan to accept greenshoe in any of the remaining bond sales, helping avoid extra supply, they said. A finance ministry spokesman didn’t immediately respond to a phone call and text messages seeking comment. India is scheduled to borrow a net 500 billion rupees via bills this fiscal year.

The government is currently borrowing a gross 220 billion rupees each week via t-bills in the current quarter.