This refers to the report “Yields soar to 4-month high at first govt bond auction of FY13” (April 4). The situation could have been avoided. As on March 23, 2012, the central government had a balance of Rs 665.29 billion crore with the Reserve Bank of India (RBI). I know that often the government’s balance in RBI is at the minimum of Rs 100 crore at the beginning of the financial year. Redemptions of old loans worth Rs 26,890 crore were expected on April 4. The central government had deposits in commercial banks also – Rs 73,438 crore – as on the last Friday of March 2009. They would have gone up since then. RBI has enhanced the ways and means advances (WMA) to the Centre to Rs 50,000 crore from April to June this year on which the government could have drawn. There was really no need for the government to enter the market in the latest instance. The interest paid to RBI on WMA returns to the government at the end of the year when the transfer of net income takes place. Of course, WMA means the creation of reserve money. But it happens when RBI engages in buybacks also. The government will do well to desist from accessing the market unless absolutely necessary.
A Seshan Mumbai
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