 "RBI repurchases Rs 2,069 cr worth of bonds, against notified Rs 60,000 cr")
The Reserve Bank of India (RBI) repurchased Rs 2,069 crore worth of government bonds on Thursday, against the notified amount of Rs 60,000 crore, as banks refused to sell the securities at a loss, said market participants.
“Most of the securities were bought during the COVID-19 pandemic at higher prices and the RBI was not ready to pay at those levels; that’s why they accepted the small amount,” said a dealer at a state-owned bank.
The securities scheduled for buyback were 6.18 per cent 2024, 9.15 per cent Government Securities (GS) 2024, and 6.89 per cent GS 2025, maturing on November 4, November 14, and January 16, respectively.
Despite receiving offers totalling Rs 26,877.161 crore for the 6.18 per cent GS securities, the RBI accepted only six bids amounting to Rs 552.999 crore at a cut-off price of Rs 99.61. Similarly, for the 9.15 per cent GS, it accepted two bids worth Rs 1,513 crore out of 12 offers totalling Rs 6,479.791 crore, at a cut-off price of Rs 100.98. Only one bid worth Rs 4 crore was accepted for the 6.89 per cent GS 2025 out of 27 offers worth Rs 7,238.497 crore, at a cut-off price of Rs 99.86.
This buyback follows a previous auction on May 9, where the RBI bought back securities worth Rs 10,512.993 crore, significantly less than the announced amount of Rs 40,000 crore.
“If the RBI conducts more buybacks then banks will demand fair prices for the bonds. These bonds were bought at much higher prices,” said a dealer at a state-owned bank.
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At the previous buyback auction conducted on May 9, the RBI had repurchased Rs 10,512 crore worth of government bonds, against the notified amount of Rs 40,000 crore. Market participants said that the RBI accepted bids only at Financial Benchmarks India Private Limited (FBIL) levels.
FBIL is an organisation in India that is responsible for administering and publishing various financial benchmarks, including interest rate benchmarks. These benchmarks are used as reference rates for various financial products such as loans, bonds, and derivatives. It is regulated by the RBI.