Govt to spend Rs 6,500 cr of surplus cash to buy back bonds

indiannThe government of India has decided to utilize Rs 6,500 cr of surplus cash to buy back bonds that it issued recently.

The bonds carry 1.44% interest over and above the wholesale inflation index rate and were due to repurchase only in the year 2023.

The government of India has seen a sudden influx of cash as it has not allowed the prices of petrol and diesel prices to go down. Instead, it collects the difference between the actual petrol and diesel prices (down due to a sharp fall in crude oil prices) in the form of higher taxes.

The repurchase of stock will lower government’s debt levels and interest payments.

“The repurchase by the Government of India will be undertaken to redeem the Government Stocks prematurely by utilizing surplus cash balances. The above repurchase of the Government Stocks is purely ad hoc in nature,” it said.

Auction for securities will be on price based auction format.

The auctions will be conducted using multiple price method. Bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on February 11, 2016 (Thursday) between 10.30 a.m. and 12.00 noon. The result of the auctions will be announced on the same day.