RBI to Manage ₹25,000 Crore Govt Bond Buyback on Oct 10: Will This Boost India’s Debt Strategy?

The Indian government has announced a buyback of government bonds worth up to ₹25,000 crore through an auction, which will be conducted by the Reserve Bank of India (RBI) on October 10.

As the government’s debt manager, the RBI will carry out the auction, allowing banks and other bond market players to buy back five different government securities. The bonds included in this buyback have different maturity dates, with one maturing this month, another in July, and three others in November.

The bonds being repurchased are:

1. 7.72% bond maturing on May 25, 2025,
2. 5.22% bond maturing on June 15, 2025,
3. 8.20% bond maturing on September 24, 2025,
4. 5.15% bond maturing on November 9, 2025,
5. 7.59% bond maturing on January 11, 2026.

This auction will be the fifth one since May, when the RBI resumed such buyback auctions after a six-year break. The previous auctions, held on May 9, 16, 21, 30, and June 6, saw limited interest from the market, with only a small portion of the bonds being bought back. One reason could be that banks were not satisfied with the prices offered for selling the bonds.

When the government buys back bonds before they mature, it injects funds into the banking system by paying the bondholders early. This process helps the government manage its future debt repayments more smoothly.

The government’s cash position is strong thanks to good advance tax collections in September. This may be why it can afford to repay some of its debt early. The government’s advance tax collections for the first half of this financial year (April to mid-September) increased by 22.61% compared to the same period last year, reaching ₹4.36 lakh crore. This rise reflects strong corporate performance and a healthy economy.