RBI: Govt to buy back bonds worth Rs 40,000 crore; move to ease tight liquidity
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Mumbai: In a move that will ease the prevailing tight liquidity conditions in the banking system, the Reserve Bank of India on Friday said the Centre plans to buy back Rs 40,000 crore worth of government securities on May 9, the first such repurchase since 2018. The unexpected move is also seen bringing down yields on short-term government bonds, as the three securities that the government has chosen to buy back are all maturing within six to nine months. A fall in government bond yields brings down cost of borrowing for companies as pricing of corporate bonds is benchmarked to sovereign debt. A bulk of corporate borrowing is through short-term papers. The bonds that the government has announced for buyback are the following – the 6.18%, 2024 paper, the 9.15%, 2024 paper and the 6.89%, 2025 paper. “The offers for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on Ma...