MUMBAI - Indian government bonds ended largely unchanged on Thursday, giving up intraday gains, as caution ahead of the Reserve Bank of India's policy decision on Friday, outweighed the impact of fall in U.S. yields.

The benchmark Indian 10-year government bond yield ended at 7.3405% after closing at 7.3340% on Wednesday. Earlier in the day, the yield fell to 7.2660%.

"Market is nervous regarding the monetary policy, considering what is going on globally, and hence the rally was not able to sustain," said Debendra Kumar Dash, senior vice president, treasury, at AU Small Finance Bank.

"Any comment on inflation or policy stance will remain crucial for future rate trajectory," Dash said.

A majority of market participants are expecting the central bank to raise its key interest rate by 50 basis points for a third consecutive time.

The RBI has already raised rates by 140 basis points between May and August to 5.40%, to tackle inflation that has stayed above its tolerance level for eight straight months through August.

Market focus would also remain on any commentary over the prevailing banking system liquidity, which slipped into deficit last week and has oscillated between surplus and deficit since then.

Bond yields had eased earlier in the day, as U.S. yields nosedived after the Bank of England launched an emergency bond buying plan to restore financial stability in markets that were rocked by the new British government's fiscal policy plans.

The 10-year U.S. yield eased over 30 basis points on Wednesday, after hitting 4.02% earlier in the day for the first time since April 2010. It was last at 3.84%.

Traders also await the Indian government's borrowing calendar for October-March, which is likely to be detailed over the next few days. Analysts expect the market to absorb the bond supplies for the rest of this fiscal year, although at higher yields.

The government is scheduled to borrow a gross 5.86 trillion Indian rupees ($71.54 billion) in October-March. This could increase by another 160 billion rupees after New Delhi failed to raise the planned amount from the sale of floating rate securities in August-September.

(Reporting by Dharamraj Lalit Dhutia; Editing by Neha Arora)