The government could tap the bond market soon as its short-term borrowings from the Reserve Bank of India were close to the ceiling of Rs 100 billion, a banking source said on Wednesday.

The government can borrow short-term funds up to a specified limit from the central bank under a facility called ways and means advances.

"The WMA is near the limit. But there is an auction scheduled for early June, which is not far away," said the source, who declined to be identified.

The federal government is due to raise Rs 90 billion between June 2 and 8 through two bond issues, according to its calendar for April-September.

Asked whether the Reserve Bank of India was likely to hold an open market bond sale to mop up surplus cash, the banking source merely replied that the central bank was monitoring the money market and that fresh bond supplies were anyway due soon.

The ample funds were reflect in the day's repo auction, where the central bank received and accepted bids for 300.85 billion rupees, the highest amount in nearly a month.

The source said that money was flowing into the system from a variety of sources, including the central bank's purchase of dollars from the currency market and government spending.

The source said that the government was also due to start swapping costly debt, borrowed when interest rates were higher, with cheaper debt starting from June.