RBI tells SBI to bid aggressively at next switch auction
On October 18th, the government is scheduled to switch two short-term bonds – the 5.09 per cent, 2022 paper and the 8.08 per cent, 2022 paper (maturing in April 13th 2022 and August 2nd, 2022) with three longer-term floating rate bonds – the FRB 2028 bond, the FRB, 2031 bond and the FRB 2034 bond.
The total quantum of the switch, or Conversion operation is scheduled at Rs 36,000 crores.
In a ‘Conversion’ or switch operation, the government typically issues longer-term bonds in lieu of short-term papers in order to smoothen out redemption obligations in the future.
In the next financial year, the government’s debt repayments are scheduled at a humongous Rs 4.2 lakh crores. If the government and the RBI do not manage to bring this figure down significantly, gross borrowing – the sum of the government’s net cash requirement plus redemptions are likely to outstrip the earlier record high of roughly Rs 13 lakh crores.
“RBI had a backdoor meeting with SBI; out of the 36,000 crore of floaters (FRBs) up for auction, SBI will take at least 20,000 crores; that was the essence of the conversation,” a treasury head said with knowledge of the matter said on condition of anonymity.
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.