Government Announces Repurchase of Securities

IAS Prelims 2023

The Government of India has announced the repurchase of its Securities through Reverse Auction for an aggregate amount of Rs. 3,500 crore (face value).

The security-wise details of the repurchase are given as under:

S. No. Nomenclature Date of maturity
1. 7.49% GS 2017 (conv) 16-Apr-2017
2. 8.07% GS 2017-Jul 03-Jul-2017
3. 7.99% GS 2017 09-Jul-2017
4. 7.46% GS 2017 28-Aug-2017

The repurchase by the Government of India will be undertaken to redeem prematurely the Government Stocks by utilizing surplus cash balances. The above repurchase of the Government Stocks is purely ad hoc in nature.

Auction for securities will be on price-based auction format. The auctions will be conducted using multiple price method. Bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on March 17, 2017 (Friday) between 10.30 a.m. and 12.00 noon. The result of the auctions will be announced on the same day.

A Government security is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation.  Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).

In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).

Government securities carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. Government of India also issues savings instruments (Savings Bonds, National Saving Certificates (NSCs), etc.) or special securities (oil bonds, Food Corporation of India bonds, fertiliser bonds, power bonds, etc.). They are, usually not fully tradable and are, therefore, not eligible to be SLR securities.