Reserve Bank of India has converted four securities maturing in 2017-18, having a total face value of about ₹37,078 crore, to longer tenor securities.
Through the conversion, the government securities in the RBI’s portfolio that were to mature in 2017-18 will now mature in 2024-25 and 2029-30.
The transaction was conducted on January 25, 2017, at the Fixed Income Money Market and Derivatives Association of India (FIMMDA) prices.
If these securities were to be redeemed, the government would have had to stump up cash to pay the RBI via fresh borrowing. So, the government’s gross market borrowing could have gone up as a result.
Open market operations (OMOs) are conducted by the RBI by way of sale/ purchase of government securities to/ from the market with the objective of adjusting rupee liquidity conditions in the market on a durable basis.
Government Securities:
A government security is a bond or other type of debt obligation that is issued by a government with a promise of repayment upon the security’s maturity date.
Government securities are usually considered low-risk investments because they are backed by the taxing power of a government.
Government securities are usually issued for two different reasons. The primary reason that most government securities are issued is to raise funds for government expenditures. The government also issues treasury securities to cover shortfalls (deficits) in its annual budget.
