Reserve Bank of India to Auction State Government Securities Worth 14,500 Crore Rupees
Why it matters
The Reserve Bank of India (RBI), acting as the debt manager for state governments, has scheduled a multi-state auction of securities to meet the developmental and fiscal requirements of the participating entities. The notified amount of ₹14,500 crore will be raised through a mix of new yield-based auctions and re-issues of existing stock. Uttar Pradesh and Madhya Pradesh are the largest borrowers in this cycle, with Kerala and Bihar also offering significant stock. The auction is governed by the Government Securities Act, 2006, and the resulting investments qualify for the Statutory Liquidity Ratio (SLR) for banks under Section 24 of the Banking Regulation Act, 1949.
The procedural framework utilizes the E-Kuber Core Banking Solution for electronic bidding. A key feature of this auction is the 'Scheme for Non-competitive Bidding Facility', which reserves 10% of the notified amount for individuals and small institutions, capped at 1% for a single bid per stock. This facility is accessible via the Retail Direct portal, promoting broader participation in the government securities market. The yields determined in this auction will reflect the current market sentiment and the credit profiles of the respective state governments, influencing their future borrowing costs.
| State | Amount (₹ Crore) | Tenor (Years) |
|---|---|---|
| Uttar Pradesh | 4,500 | 10, 15 (Re-issue) |
| Kerala | 1,800 | 23 |
| Madhya Pradesh | 2,800 | 8, 22 |
| Bihar | 2,400 | 9, 15 (Re-issue) |
Glossary
Statutory Liquidity Ratio (SLR): The minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold, or other securities approved by the RBI.
E-Kuber: The Core Banking Solution (CBS) of the Reserve Bank of India that provides a platform for various banking and market operations, including the auction of government securities.