MUMBAI - Indian government bond yields fell on Thursday, as the Reserve Bank of India is seeking feedback from market participants on settling bond trades on the Euroclear platform.

The benchmark 7.26% 2033 bond yield settled at 7.1772%, after ending the previous session at 7.2083%. The yield posted biggest single day fall since Aug. 18.

The central bank has sought views from private and foreign banks on settlements via Euroclear, treasury officials told Reuters.

"Today's rally was mainly because of this news, but the rally is difficult to sustain unless something actually materialises," said Yogesh Kalinge, vice-president at AK Capital Services.

"I think the benchmark yield will rise again and test 7.25% levels, as U.S. yields and oil prices remain elevated."

Euroclear settlement are expected to expand the foreign investor base for Indian debt and facilitate the listing of securities on global bond indices.

Overseas investors had stepped up purchases of government bonds in August, ahead of JP Morgan's review for a possible index inclusion, which is expected next month.

Indian bond yields have risen in recent sessions, tracking U.S. yields and oil prices and amid concerns over domestic inflation staying elevated.

The 10-year U.S. yield hit 4.30% in Asian trading hours, while the benchmark Brent crude oil contract stayed above the $90-per-barrel mark amid supply shortage concerns.

Bond traders now await the RBI's next move to curb excess liquidity and curtail inflation.

The RBI has been selling dollars and has also asked banks to park an additional quantum of fresh deposits with it.

The central bank may, by Friday, ask lenders to continue maintaining additional cash reserves for the next two fortnights, while lowering the ratio, treasurers had told Reuters earlier this week.

(Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by Mrigank Dhaniwala)