The Reserve Bank of India has announced enhanced auctions of treasury bills and government bonds totalling Rs 22,000 crore (Rs 220 billion) next week as part of the government's borrowing programme.
The RBI will on Monday issue 91-day and 182-day treasury bills for Rs 3,000 crore (Rs 30 billion) and Rs 2,000 crore (Rs 20 billion), respectively, followed by auction of 7.49 per cent, 2017 bond in tranches of Rs 5,000 crore (Rs 50 billion) on Tuesday and Rs 6,000 crore (Rs 60 billion) on Friday. Another auction of 91-day and 182-day t-bills for Rs 5,000 crore (Rs 50 billion) would be held on Wednesday.
The higher borrowing has been triggered with the government taking recourse to the overdraft facility. This is the first time since 2003 that the government has used the overdraft facility with the RBI to manage excess expenditure by borrowing an additional Rs 12,000 crore (Rs 120 billion) over and above the ways and means advances of Rs 20,000 crore (Rs 200 billion).
The total balance borrowed by the government from the RBI now stands at Rs 32,000 crore (Rs 320 billion). The overdraft has been running with the RBI for the seventh consecutive day, while it is entitled to maintain the facility for 10 days.
The government will see inflows on account of advance tax payments by June 15, but the actual receipts will flow in only on June 18.
Under the memorandum of understanding of the Fiscal Responsibility and Budgetary Management Bill, the government is entitled to ways and means advances of Rs 20,000 crore in the first half of the current financial year on any given working day.
Over and above this, the government can use the overdraft facility for 10 consecutive days. Redemption of government bonds has been much in excess of the receipts in the last two months, which has put pressure on the government's cash balances.
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