Officials of the Reserve Bank of India (RBI) met select lenders on Thursday, where these issues, among others, were discussed, according to bankers aware of the development.

"Since the RBI has announced its intention to conduct open market bond sales, trading volumes have gone down sharply and yields are stuck in a very narrow range," one of the bankers said.

"There is hardly any interest to go for big positions on either side."

All the bankers requested anonymity as they are not authorised to speak to the media.

The RBI did not reply to a Reuters' email seeking comment.

The central bank on Oct. 6 said that it plans to sell bonds via auctions to manage banking system liquidity.

The unexpected announcement pushed bond yields higher.

Since Oct. 9, the 10-year benchmark yield has been stuck in a narrow 11-basis-point range, due to uncertainty about the timing and tenor of the bond sales, which has hurt volumes.

Meanwhile, a lack of volatility in the currency market over the last few weeks has also hit banks' trading activity.

"The rupee market is literally dead due to heavy central bank interventions," a trader with a private bank said.

"Such low volatility has significantly impacted the activity on the prop (proprietary) book."

The rupee stayed in a narrow 83.04-83.28 band against the U.S. dollar in October, the narrowest range since 2004.

The intraday volatility in the pair has halved this fiscal year from the last fiscal, according to Kotak Securities.

At the meeting on Thursday, the central bank queried banks on the skewed liquidity distribution in the banking system and also discussed an upcoming sale of green bonds to get a sense of the demand, the bankers said.

Last month, the central bank had nudged banks to lend surplus funds to their peers in the interbank call money market.

(Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)

By Dharamraj Dhutia