Context:
It is estimated that the Reserve Bank of India (RBI) holds around â‚ą1 trillion in sovereign bonds which are maturing over the forthcoming financial year. Traditionally, the government would have swapped those maturing bonds for a longer dated debt, thereby reducing the gross borrowing target.
Important Points:
- So, Bonds Maturity
- RBI has held onto treasury bonds worth â‚ą1 trillion, maturing for redemptions next year.
- Swap Bemoaned As Undone
- Normally, this maturing paper would have been swapped out with long-term debt well before the Budget to meet the estimated jump in the lower gross borrowing target end.
- Market-Based Approach
- Though, the government does not plan a swap with RBI even this time also, however it plans to manage mature bonds in market-based operation.
- The economic affairs secretary, Ajay Seth mentioned that government wishes to let out these bonds in the market be it is either public institution, or even the RBI.
- The gross borrowing target for 2025-26 has risen from â‚ą14.01 trillion in the current fiscal year to â‚ą14.82 trillion due to this move.
Implications
- Gross Borrowing Target
- The decision manifests in the rise in the borrowing target as the maturing bonds will not be swapped for longer-term debt thus reducing the short-term borrowing requirement of the government at present.
- Market Approach
- The process of addressing the maturing bonds under a market-based approach can reveal that the government prefers a more open and competitive process, an implication with broader market effects.
