In the first half of current financial year, the Centre has borrowed nearly Rs 7 lakh crore and plans to borrow Rs 6.61 lakh crore in the second half.
Demand from investors like Employees Provident Fund Organisation, Life Insurance Corporation of India, pension funds and other retirement trusts for SDLs has gone up as they fetched the highest yield
Despite the average cut-off at the most recent debt auction on Tuesday decreasing a little bit by 2 bps to 7.86%, the borrowing cost for the states is still high and has been hovering around 7.9% for four weeks in a row.
Emerging mutual fund categories like target maturity funds, floating rate funds, as well as traditional investments now offer more options to investors
The fund will look at avoiding bonds of state governments with weaker financials
The Economic Survey expects RBI move to channelise savings of middle class, small businesspersons and senior citizens into G-Secs.
Prime minister Narendra Modi launched RBI’s retail direct scheme along with the integrated ombudsman scheme on November 11. With the new scheme, retail investors will directly be able to invest in government securities. Watch this video to find out what is the RBI-RD scheme.
Prime Minister Narendra Modi launched RBI Retail Direct, allowing investors direct access to buying and selling of government securities, free of cost.
The RBI Retail Direct Scheme is aimed at enhancing access to government securities market for retail investors. It offers them a new avenue for directly investing in G-secs and state bons. Retail investors will be able to easily open and maintain their government securities account online with the RBI, free of cost.
During the first half, the government borrowed Rs 7.02 lakh crore though securities or G-Secs, the Finance Ministry said in a statement on September 27.
The RBI earlier this year opened certain specified categories of government securities (G-Secs) for non-resident investors as part of an initiative to deepen the bond market.
The govt is helped by increased purchase of G-secs by the RBI through OMOs. For April 1-Sept 13 2020, the RBI purchased Rs 1.76 lakh crore worth of G-secs on the secondary market. This is more than three times the Rs 52,550 crore of G-secs that it bought in the same period last year.
"BSE to launch 'BSE-Direct' for retail investors in non-competitive bidding of G-sec and T-bills from December 03, 2018," the exchange said in a Friday release.
A favourable demand-supply balance of G-secs by increasing demand through reducing their supply and also lowering downward rigidity on operative overnight rates, RBI can ensure better transmission and help government save Rs 10,000 crore annually on interest cost, says a report.
When the central government goes around with a hat in hand, it is usually questionable whether it can negotiate, much less, secure cheaper loans.
Yields have fallen 13 basis points over the past two days as shortsellers scramble for cover.
Banks' heavy investments into G- secs since the note-ban may turn out to be a bad call as they await a treasury shock in the current quarter following the 45 -50 bps spike in bond yields.
Speaking to CNBC-TV18 Anshula Kant, Deputy MD & CFO of SBI said that deposit growth has been strong for the bank. Sudhin Choksey, MD of Gruh Finance, said that demand side incentives are a significant relief to families in the segment. Jairam Sridharan, CFO, Axis Bank said the government schemes are good.
Insurance companies have chosen to invest heavily in government securities, even as IRDAI has permitted investments in new instruments
The 7.59 percent government security maturing in 2026 gained to Rs 109.1350 from Rs 108.2850 previously, while its yield moved down to 6.26 percent from 6.38 percent.
Government bonds (G-Secs) rebounded due to fresh demand from corporates and banks, while the overnight call money rates ended lower following lack of demand from borrowing banks amid comfortable liquidity situation in the banking system.
The Finance Ministry hopes that foreign portfolio investors' (FPIs) exposure to the domestic bond markets will rise from the present 65 per cent of their permissible ceiling of USD 51 billion.
The 7.59 percent government security maturing in 2026 declined to Rs 99.55 from Rs 99.63 previously, while its yield moved up to 7.65 percent from 7.64 percent.
"The Reserve Bank, in consultation with the Government of India, has converted two securities from its portfolio maturing in 2016-17 and one security maturing in 2021-22 having total face value of about Rs 37,300 crore to longer tenor securities maturing in 2023-24 and 2024-25," RBI said in a notification.