RBI to Auction ₹4.73 Lakh Crore Government Bonds in Q4 FY25

The Reserve Bank of India aims for a non-disruptive auction process to meet borrowing needs of State Governments and Union Territories.

Mumbai, January 1: The Reserve Bank of India (RBI) has announced plans to auction government bonds worth ₹4.73 lakh crore during the January–March quarter of FY2024-25 to meet the borrowing requirements of State Governments and Union Territories (UTs).

In a notification issued by the RBI, the central bank shared that weekly auction schedules will be released, including the names of States and UTs confirming participation. The exact borrowing amounts and specific details of participating regions will be communicated through press releases two to three days prior to each auction.

The RBI emphasized its commitment to conducting auctions in a non-disruptive manner, taking into account market conditions and other relevant factors. The borrowing process will be evenly distributed across the quarter to maintain market stability.

“RBI would endeavour to conduct the auctions in a non-disruptive manner, taking into account the market conditions and other relevant factors and distribute the borrowings evenly throughout the quarter,” the notification stated.

Flexibility in Auction Process

The RBI retains the right to adjust auction dates and borrowing amounts in consultation with State Governments and UTs, ensuring flexibility and responsiveness to evolving requirements.

Understanding Government Bonds (G-Secs)

Government bonds, also known as Government Securities (G-Secs), are tradeable debt instruments issued by Central and State Governments to acknowledge their debt obligations.

• Short-term securities: Treasury bills (maturities under one year)
• Long-term securities: Government bonds or dated securities (maturities of one year or more)

While the Central Government issues both treasury bills and bonds, State Governments issue only bonds, known as State Development Loans (SDLs).

These instruments are considered risk-free gilt-edged securities as they carry virtually no default risk.

Purpose of Bond Auctions

Bond auctions are a key mechanism for governments to raise funds for development projects, infrastructure, and other public sector initiatives. Investors in government bonds are essentially creditors to the government, earning interest over a fixed period.

The upcoming auctions will play a crucial role in meeting fiscal targets while maintaining financial market stability.