The Centre has offered to repurchase up to Rs 25,000 crore worth of government securities through a buyback auction that will be conducted by the Reserve Bank of India on October 10.
The RBI, which is the Centre’s debt manager, will carry out the auction in which banks and other bond market participants can buy back five government securities, the central bank said on Friday. One of the securities matures this month while another one matures in July. Three of the securities will mature in November.
The bonds are as following – the 7.72%, 2025 bond maturing on May 25, 2025, the 5.22%, 2025 bond maturing on June 15, 2025, the 8.20%, 2025 bond maturing on September 24, 2025, the 5.15%, 2025 bond maturing on November 9, 2025 and the 7.59%, 2026 bond maturing on January 11, 2026.
The RBI started conducting such buyback auctions on behalf of the government on May 9, after a gap of six years. Since then, it has conducted four rounds of such auctions – on May 16, May 21, May 30 and June 6.
However, the buyback auctions failed to elicit strong participation from the market, with the RBI and the government accepting only a small portion of the bonds that the Centre has offered to buy back. This was likely because of discomfort with the price levels that banks had offered to sell the bonds back to the government.
Bond buyback operations by the government result in an immediate injection of funds in the banking system as banks are repaid by the Centre before the actual dates of maturity of outstanding bonds. Buybacks are typically used as a tool to smoothen out the government’s future debt repayment obligations.
The government has witnessed healthy advance tax collections in September, likely boosting its cash balances and permitting it to retire debt before maturity.
The government’s advance tax collections rose 22.61% to ₹4.36 lakh crore in the first half of the current financial year (April- September 15), signalling a strong corporate performance and robust economy, official data released last month showed.
This includes advance corporate tax of ₹3,31 lakh crore and advance personal tax of ₹1,04 lakh crore. The advanced tax collections in the corresponding period last year stood at ₹3.55 lakh crore.
