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Informist, Thursday, Aug 22, 2024

 

--Fin min source: May cut FY25 net T-bill borrow by 50-100 bln rupees

--CONTEXT: Govt pegged net T-bill borrow at (-)500 bln rupees in Jul
--Fin min source: Lower T-bill borrowing to ensure better cash mgmt

--Fin min source: May buy back more gilts FY25 for better cash mgmt

 

By Krity Ambey and Sagar Sen

 

NEW DELHI – The government may further cut its net short-term borrowing through Treasury bills by 50-100 bln rupees in 2024-25 (Apr-Mar), going beyond the already drastic reduction announced in the full Budget presented last month, a senior finance ministry official said.

 

In the full Budget for the current financial year ending March 2025, the government slashed its net borrowing through T-bills to (-)500 bln rupees from 500 bln rupees in the Interim Budget. At the same time, it increased the drawdown from its cash balance to 1.40 trln rupees from 35.49 bln rupees in the Interim Budget. This means the government will net redeem T-bills this year using its cash pile. In 2023-24, the government had raised net 483.49 bln rupees through T-bills, down from a budgeted 500 bln rupees. 

 

"We borrow through T-bills for some repayments during the year, but this time we may use our cash surplus for that," the official told Informist. This will ensure more efficient cash management, the official added. 

 

The government had revised down its gross T-bill issuances by 600 bln rupees in the quarter ended June owing to a high cash balance. This was due to a large accumulation of cash by the government on account of lower spending due to the Model Code of Conduct, which was enforced on Mar 16 and continued through April and May amid Lok Sabha elections. The government's total expenditure was down 7.7% on year as of June this fiscal, of which capital expenditure fell 35%.

 

However, the government is now looking to further cut T-bill issuances as it has still not depleted the cash pile it had accumulated due to lower spending when the Model Code of Conduct was in place, the finance ministry official said.

 

"The current cash position is not spectacular, but there is room to bring it down further. Going ahead, the revenue is expected to be buoyant, and we want to utilise it judiciously. We do not want to hold on to idle cash," the official said.

 

The government is set to raise 2.60 trln rupees through T-bills in Jul-Sep, and it will release the calendar of T-bill issuances for Oct-Dec by Sep 30.

 

Besides cutting T-bill issuance, the government may also look to buy back more gilts during the year in order to efficiently manage cash, the official said. The government had bought back gilts worth 302.48 bln rupees only in May and June, against the notified amount of 2.30 trln rupees.

 

Asked why the buybacks met with limited success, the official said they were done on the government's terms, and it accepted only those bids that were up to the mark. "And that is how we will continue when we do more buybacks."

This financial year, the government bought back securities after a gap of six years. The government had last used its cash surplus to buy back securities in 2018. It had notified a buyback of 292.49 bln rupees, but had accepted bids worth 137.88 bln rupees from the offer worth 231.11 bln rupees.   End

 

 

Edited by Tanima Banerjee

 

 

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