The government has offered to repurchase Rs 30,000 crore worth of its securities through a buyback auction that will be conducted by the Reserve Bank of India on June 6.
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 Monday. One of the securities matures this month while another one matures in July. Three of the securities will mature in November.
Bond buyback operations by the government result in an immediate injection of funds – or liquidity – in the banking system as banks are repaid by the Centre before the actual dates of maturity of outstanding bonds.
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 so far conducted four rounds of such auctions – on May 9, May 16, May 21 and May 30.
However, the buyback auctions have 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 is likely because of discomfort with the high prices that banks have been offering to sell the bonds back to the government.
