Govt to issue 50-yr securities, sticks to borrowing plans

The Centre will borrow ₹6.55 trillion for the second half of the ongoing financial year— or 42.45% of its gross market borrowing of ₹15.43 trillion for the full year—the government said, leaving its borrowing plans unchanged.

The borrowing for FY24 will be done through dated securities, including ₹ 20,000 crore through issuance of sovereign green bonds, the finance ministry said in a statement Tuesday.

While the government will stick to its borrowing plan for the year, it will issue 50-year securities for the first time, in response to a market demand for longer duration securities, the ministry added.

The borrowing programme is finalized in consultation with the Reserve Bank, the ministry said. The Centre has budgeted a gross market borrowing of ₹15.43 trillion in FY24. The borrowing in the second half of the year will be completed through 20 weekly auctions, spread over 3, 5, 7, 10, 14, 30, 40 and 50- year securities, with different shares.

Finance minister Nirmala Sitharaman had in her budget speech for FY24 projected a fiscal deficit of ₹ 17.86 trillion accounting for 5.9% of the nominal gross domestic product (GDP). The Centre is targeting a fiscal deficit below 4.5% of GDP by FY26.

The share of borrowing (including the green bonds) under different maturities will be: 3 year (6.11%), 5 year (11.45%), 7 year (9.16%), 10 year (22.90%), 14 year (15.27%), 30 year (12.21%), 40 year (18.32%) and 50 year (4.58%).

Switching of securities will be carried out to smoothen the redemption profile. Out of the ₹1 trillion of budgeted (budget estimate) switch amount, ₹ 51,597 crore of switch auctions have already been conducted. The remaining amount of switch auctions will be conducted in the second half.

The government will continue to exercise a greenshoe option to retain an additional subscription of up to ₹ 2,000 crore against each of the securities indicated in the auction notification, the ministry added.

Weekly borrowing through issuance of Treasury Bills in third quarter of FY 2023-24 is expected to be ₹24,000 crore with net borrowing of ₹(-)52,000 crore during the quarter. There will be issuance of ₹ 7,000 crore under 91 DTBs, ₹ 8,000 crore under 182 DTBs and ₹9,000 crore under 364 DTBs in each auction to be conducted during the quarter.

To take care of temporary mismatches in government accounts, the Reserve Bank of India has fixed the Ways and Mean Advances (WMA) limit for H2 of FY 2023-24 at ₹50,000 crore.

The ministry also said that as in the past, all the auctions covered by the calendar will have the facility of non-competitive bidding scheme under which 5% of the notified amount will be reserved for the specified retail investors.

Also, the Centre or the RBI will continue to have the flexibility to bring about modifications in the borrowing calendar in terms of the notified amount, issuance period or maturity and to issue different types of instruments, including instruments having non-standard maturity, floating rate bonds (FRBs), consumer price index linked inflation indexed bonds (IIBs) etc., depending upon the requirement of the government, evolving market conditions and other relevant factors, after giving due notice to the market.

The ministry also said the borrowing calendar is subject to change, if circumstances so warrant.