Government privately places Rs 5,000 cr with RBI

MUMBAI, JUNE 4: The government on Thursday privately placed Rs 5000 crore through a ten-year paper -- carrying 12 per cent coupon -- with th...

MUMBAI, JUNE 4: The government on Thursday privately placed Rs 5000 crore through a ten-year paper — carrying 12 per cent coupon — with the Reserve Bank of India. This is the second private placement with the RBI by the government in the current financial year. Earlier, it had privately placed an eight-year paper with the RBI at a coupon of 11.75 per cent.

The placement of the 10-year paper at 12 per cent sends out a clear signal that the RBI does not think that interest rates are hardening. The 10-year paper, auctioned on April 19, also carried 12 per cent coupon.

The placement comes after the government overshot its limit for the first half under the ways and means advances (WMA). The recourse through these advances has shot up to touch Rs 10,306 crore for the week ended May 22. This is just Rs 700 crore short of the Rs 11,000 crore limit that the RBI has set out for the government in the first half.

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The centre was forced to float a new nine-year paper on May 28 due to the limit being reached. Theapex bank had fixed the coupon rate 11.90 per cent — much below the expected rate of 12.15 per cent — which is why the security devolved on the RBI.

The floatation of the nine-year paper which was expected to bring down the advances has not been successful in its objective as there was no let up in government’s recourse to WMA.

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