The Union government yesterday placed securities worth Rs 6,000 crore with the Reserve Bank of India. The move was necessitated as the Centre exceeded its ways and means advances limit prescribed in its agreement with the RBI.
The tranche consists of two securities: the 11.57 per cent 2004, worth Rs 4,000 crore, and the 12.15 per cent 2008, worth Rs 2,000 crore. The current market yield is around 11.56 per cent on six-year securities and 12.04 per cent on 10-year securities.
According to sources, the government crossed the WMA limit last week. Under the agreement signed last March, the WMA limit for the second half of 1997-98 was fixed at Rs 8,000 crore. By the end of the fiscal , this figure is supposed to be reduced to nil.
Thus, if the WMA exceeds 75 per cent of the limit, new securities have to be floated. As on March 6, the WMA figure was Rs 5,225 crore, an increase of Rs 3,711 crore. Over the next fortnight, it was Rs 6,000 crore, thus exceeding the 75 per cent trigger.
Under its market borrowing programme for 1997-98, the government had borrowed Rs 37,390 crore till March 13. In net terms, this meant Rs 27,488 crore, against Rs 19,900 crore last year.
The securities placed with the Reserve Bank will enable it to conduct open market operations more smoothly as its stock will rise by that extent, said a primary dealer.
In the last two weeks, the RBI has sold securities worth more than Rs 3,000 crore, thus depleting its stock of securities. The two new securities will replenish its stocks, the dealer explained.
