With the Centre having a comfortable liquidity situation for now, the Reserve Bank of India is expected to anytime start off with a part of the planned bond buyback programme.
“The debt switch is unlikely to be for the full Rs 50,000 crore but will concentrate only on securities that are likely to mature in the next one or two years,” said two persons familiar with the development.
The move comes at a time when the finance ministry has postponed a Rs 15,000 crore bond auction stating “comfortable liquidity position”.
The Reserve Bank of India is understood to have also spoken to bankers on the issue to get feedback as banks are the main buyers of government paper.
The bond buyback programme is likely to be off market so as not to disturb the bond yields or disrupt the market.
“The objective is to avoid too much redemption pressure over the next few years by replacing shorter tenor paper with longer date securities,” said one of the sources adding that the debt switch would be done only to the extent that it does not put pressure on the Exchequer.
The Union Budget 2013-14 had outlined a bond-buyback programme for Rs 50,000 crore. “Buyback or switching operations are proposed for easing of redemption pressure for the FY 2015-16, 16-17, 17-18. This is part of medium term consolidation process,” it had said, adding that it would be fiscal deficit neutral.
RBI Deputy Governor HR Khan had recently said that the debt switch may be postponed to next fiscal but discussions were still on. “If there are problems, then we may not do it (in July to March this fiscal). But, it is very much on cards,” he had said earlier this month.