RBI on October 10 Rs. 25,000 crore government bond buyback auction

Through the buyback auction to be conducted by the Reserve Bank of India on October 10, the Center will raise Rs. Offered to buy back government securities up to Rs 25,000 crore.

The RBI, which is the Centre’s debt manager, will conduct an auction in which banks and other bond market participants can buy back five government securities, the central bank said on Friday. One security matures this month while the other matures in July. Three securities will mature in November.

The bonds are as follows – 7.72%, 2025 bond maturing on May 25, 2025, 5.22%, 2025 bond maturing on June 15, 2025, 8.20%, 2025 bond maturing on September 24, 2025, 2025, November 9, 2025. bonds maturing 2025 and 7.59%, 2026 bonds maturing January 11, 2026.

The RBI had launched 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 auction failed to garner strong participation from the market, with the RBI and the government accepting only a small portion of the bonds offered for buyback by the Centre. This was likely due to discomfort with the price levels at which banks offered to sell bonds to the government.

A bond buyback operation by the government results in an immediate injection of funds into the banking system as banks are paid by the center before the actual maturity dates of outstanding bonds. Buybacks are typically used as a tool to ease the government’s future debt repayment obligations.

The government has seen healthy advance tax collections in September, potentially boosting its cash balance and allowing debt to be retired before maturity.

The government’s advance tax collection rose 22.61% to ₹4.36 lakh crore in the first half of the current fiscal (April-September 15), indicating strong corporate performance and a strong economy, official data released last month showed.

It includes advance corporate tax of ₹ 3.31 lakh crore and advance personal tax of ₹ 1.04 lakh crore. Advance tax collection was ₹3.55 lakh crore in the same period last year.