On October 18th, the government is scheduled to switch two short-term bonds – the 5.09 per cent, 2022 paper and the 8.08 per cent, 2022 paper (maturing in April 13th 2022 and August 2nd, 2022) with three longer-term floating rate bonds – the FRB 2028 bond, the FRB, 2031 bond and the FRB 2034 bond.
The total quantum of the switch, or Conversion operation is scheduled at Rs 36,000 crores.
In a ‘Conversion’ or switch operation, the government typically issues longer-term bonds in lieu of short-term papers in order to smoothen out redemption obligations in the future.
In the next financial year, the government’s debt repayments are scheduled at a humongous Rs 4.2 lakh crores. If the government and the RBI do not manage to bring this figure down significantly, gross borrowing – the sum of the government’s net cash requirement plus redemptions are likely to outstrip the earlier record high of roughly Rs 13 lakh crores.
“RBI had a backdoor meeting with SBI; out of the 36,000 crore of floaters (FRBs) up for auction, SBI will take at least 20,000 crores; that was the essence of the conversation,” a treasury head said with knowledge of the matter said on condition of anonymity.