Mumbai: The Reserve Bank of India said on Friday it will convert Rs45,000 crore of intervention bonds into government bonds in instalments by the end of March, helping the government plug a budget funding hole.
The government had indicated last week it would seek the transfer of the funds to avoid overburdening the market with bond issues and causing a spike in yields before the fiscal year ends in March.
Market Stabilisation Scheme (MSS) debt was introduced in 2004, mainly to absorb surplus cash generated due to the central bank’s dollar-buying intervention in the foreign exchange market.
RBI also said it will auction Rs8,000 crore in the benchmark 10-year paper, Rs2,000 crore of 18-year paper and Rs2,000 crore in the 30-year paper. RBI was to auction 10-14 year security for Rs6,000-7,000 crore. The total borrowing amount will remain the same. RBI will also purchase Rs6,000 crore of bonds on 5 March from the secondary market with a green-shoe option to purchase up to 50% of this amount.
Anup Roy contributed to the story.