10.79% On-Tap Draws Rs 2700 Cr

The Reserve Bank of India (RBI) has received subscription amounting to Rs 2,683.45 crore for the on-tap 10.79 per cent gilt maturing in 2015.

The paper was kept on-tap for a week and RBI received 55 applications. Meanwhile, RBI has placed six 364 days treasury bills on the sale window yesterday.

Sources said that the major chunk of subscription for on tap issue has come from the Life Insurance Corporation (LIC) which picked up nearly Rs 1,900 crore worth of this gilt. Money market dealers indicate that the LIC was selling short-dated paper over the last few days to make room to subscribe to the on tap security.

 

"The RBI, this year, too, is heavily dependent on insurance companies for successfully completing the huge government borrowing programme," said a senior analyst from a leading private bank.This is primarily because there is huge bunching of securities in the short- and the medium-term segments.

The on-tap issue, however, has failed to receive response from the primary dealers. The head of a leading primary dealership said there was no point buying the paper on-tap because it is available at par for banks at the RBI window. "Now if a bank has to buy it from a PD, it would expect us to quote a lower price then that available at RBI window; effectively we have to quote a lower price and take loss on our the books."

Moreover, the market experts also said that some last minute subscription could have come yesterday, owing to an inflow of Rs 1,207.6 crore.

The coupon payment of 11 per cent 2003, 11.50 per cent 2008, 12.60 per cent 2018 saw inflow of Rs 1,207 crore in the system yesterday.

Following this issue, RBI will complete raising funds to the extent of Rs 24,683.4 crore against the borrowing target of Rs 1,16,861 crore.This also indicates that the government has raised 21.12 per cent of its total borrowing program for this year.

At the same time, the market expects the RBI to announce an auction some time during the end of this month as 12.14 per cent security is due to mature on May 29, pumping in Rs 3,182 crore in the system.