Govt to kickstart FY25 borrowing programme with a new 10-year paper

The government will kickstart its FY25 borrowing programme on April 5 by auctioning three dated securities, including a new 10-year government security (G-Sec) for raising ₹38,000 crore even as RBI said all G-Sec auctions will be conducted using multiple price auction method.

A new 10-year G-Sec (maturing in 2034) is being issued as the outstanding in the benchmark 10-year paper (7.18 per cent GS 2033) has reached about ₹2-lakh crore.

The Government will be raising ₹20,000 crore via the new 10-year paper; ₹12,000 crore via 7.25 per cent GS 2063; and ₹6,000 crore via 7.33 per cent GS 2026, according to an RBI statement.

Meanwhile, on a review of the prevailing and evolving market conditions, the Reserve Bank of India, in consultation with the Government, has decided that all securities under the market borrowing programme of government will, henceforth, be auctioned using multiple price auction method.

The above arrangement shall be in place till further review, per an RBI statement.

Depending upon the method of allocation to successful bidders, the central bank can conduct auction on uniform price basis or multiple price basis.

In a uniform price auction, all the successful bidders are required to pay for the allotted quantity of securities at the same rate – at the auction cut-off rate, irrespective of the rate quoted by them.

Multiple auction

On the other hand, in a multiple price auction, the successful bidders are required to pay for the allotted quantity of securities at the respective price / yield at which they have bid.

Overall, the government will borrow ₹14.13-lakh crore in FY25 vis-a-vis ₹15.43-lakh crore in FY24. In the first half (H1), it will borrow ₹7.5-lakh crore.

“This is one of the lowest shares raised (in the last 6 years if the Covid year is excluded) during the first half of the year,” per an assessment by Madan Sabnavis, Chief Economist, and Aditi Gupta, Economist, Bank of Baroda.

“The lower target can be attributed to three factors. First, with the elections being held in the first two months there could be some strains in liquidity with banks which is addressed to an extent by a lower programme.

“Second, banks as such are running in the deficit region in the last few months and the possibility of this trend prevailing in the next few months cannot be ruled out,” they said.

Third, a larger share has been kept for the second half on the expectations of more FPIs flowing in once the inclusion of Indian bonds in the JP Morgan Bond index gets operationalised from June onwards.



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