Sovereign Green Bonds: Govt Announces Market Borrowing Of Rs 7.7 Lakh Crore For H1FY25

The Centre government has announced plans to borrow a significant sum of Rs 7.50 lakh crore through the issuance of government securities in the first half of the fiscal year 2024-25 (FY25). This borrowing constitutes approximately 53.08 percent of the full-year estimate, as revealed by the finance ministry in a statement on March 27.

The interim budget for FY25 initially projected the centre's full-year gross borrowing estimate at Rs 14.13 lakh crore from the markets. The Reserve Bank of India (RBI) is tasked with managing the borrowing program on behalf of the government by issuing bonds through auctions held every Friday.

The borrowing figure is of utmost importance, given that the central government finances its fiscal deficit primarily through the issuance of dated securities. The size of the weekly government bond auctions during April-September is set to range from Rs 22,000 crore to Rs 38,000 crore.

In a move to diversify its borrowing instruments, the finance ministry announced the introduction of a new dated security with a 15-year tenor, amounting to Rs 1.04 lakh crore in the first half of FY25. This new security aims to align with global market practices and has been introduced based on market feedback.

Additionally, the government plans to borrow Rs 12,000 crore through green bonds in the first half of FY25, highlighting its commitment to sustainable financing initiatives. The flexibility to introduce modifications in the borrowing calendar, including changes in notified amounts, issuance periods, and maturities, remains with the Government of India in consultation with the RBI.

Furthermore, the RBI will conduct swaps of dated securities through auctions on the third Monday of every month or at more frequent intervals, with adjustments made in case of holidays. Apart from bond issuances, the government will also raise funds through Treasury Bills (T-Bills) auctions, targeting Rs 3.21 lakh crore between April 1, 2024, and June 30, 2024, in FY25.

The breakdown of T-Bill issuances includes Rs 1.44 lakh crore for 91-day T-Bills, Rs 79,000 crore for 182-day T-Bills, and Rs 98,000 crore for 364-day T-Bills. The government, in coordination with the RBI, retains the flexibility to modify the notified amounts and auction timings for T-Bills based on evolving market conditions and other relevant factors.

Furthermore, the RBI has fixed the cap for Ways and Means Advances (WMA) for the first half of FY25 at Rs 1.50 lakh crore after consulting with the Indian government. WMA serves as a short-term borrowing mechanism for the government to meet its temporary cash flow mismatches.

The RBI may initiate the fresh floatation of market loans once the Government of India utilises 75 percent of the WMA limit. This mechanism ensures smooth liquidity management and financial stability in the economy.

The government's borrowing plans for the first half of FY25 reflect its strategy to meet fiscal requirements while adapting to market dynamics and embracing sustainable financing initiatives. With a combination of bond issuances, T-Bill auctions, and WMA facilities, the government aims to maintain liquidity and support economic growth in the coming months.