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Informist, Monday, Feb. 23, 2026

 

--RBI Malhotra: Gilt switches a tool for debt mgmt, not liquidity mgmt 

 

NEW DELHI – The Reserve Bank of India's bilateral switches of government bonds with the Centre was a tool for debt management and not for liquidity management, central bank Governor Sanjay Malhotra said Monday. Addressing the media at a press conference after the RBI board meeting, the governor noted that press reports had said the government's gross borrowing aim was on the higher side in 2026-27 (Apr-Mar) amd these measures would bring down that target.

 

The Union Budget for FY27 had pegged the government gross borrowing aim at a record INR 17.21 trillion for FY27 from a revised INR 14.61 trillion in the current financial year. The government conducted two tranches of bilateral gilt switches in FY26 totalling INR 1.13 trillion, of which INR 755.04 billion of four FY27 gilts were switched on Feb. 12. A switch operation entails replacing a security maturing in the near term with a longer-maturity paper, effectively postponing the government's debt repayment.

 

"Some of the RBI holdings were maturing (in FY27), that is why we have done a switch with the RBI holdings. We also followed it up with a switch with the market," Malhotra said. "They are all part of our operating policy toolkit, they do not reflect any change in our operational strategy."

 

Speaking at the press conference, Finance Minister Nirmala Sitharaman said there was no change in the government's thinking on the subject. Following the presentation of the Union Budget for the current financial year begun April, then economic affairs secretary Ajay Seth had said that bilateral gilt switches with the RBI were not part of the record FY26 gilt switch target of INR 2.5 trillion. At the time, Seth had said the government did not want to interfere with the RBI's intended end use of its gilt holdings.

 

In November, the RBI had bought gilts in the secondary market, which bond market participants had speculated would be to replace its holdings of a maturing gilt. After its bilateral switch, the government offered to switch four FY27 gilts worth INR 250 billion with five longer-term bonds earlier Monday.

 

Economics Affairs Secretary Anuradha Thakur said on Feb. 1 this year, following the Union Budget, that the government's record gross market borrowing for FY27 was not "on the higher side" and that the Centre had a plan to manage it. RBI officials said in the following week that they would manage the gross borrowing programme of INR 17.20 trillon "efficiently".

 

Including last week's bilateral switch with the RBI, the government's total gilt switches in FY26 have risen to INR 2.40 trillion. With the bilateral switch, the government's projected gross market borrowing in FY27 could fall to INR 16.44 trillion from the budgeted INR 17.20 trillion. This is likely to fall further depending on the subscription at the switch auction Monday and any further switches of FY27 bonds the government conducts.  End

 

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

 

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