RBI moves $5.7 bn to Indian government

(5-5-09 - RBI news) - The Reserve Bank of India said today it had transferred 280 billion rupees ($5.7 billion) from its intervention bonds to the government, a move that would ease the pressure on record market borrowings planned for 2009/10.

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The RBI has taken a series of steps to ensure the government's net borrowing plan of 3.09 trillion rupees in the fiscal year that began on April 1 would go through smoothly without disrupting markets and sending yields shooting up.

The government had borrowed a net 3.02 trillion rupees in 2008/09.

The 10-year bond yield briefly ticked 1 basis points lower to 6.25 percent on the announcement. It has dropped more than 100 basis points since hitting a four-month high of 7.37 percent in mid-March.

The Reserve Bank of India said the transfer, which was made on May 2, would form part of the government's borrowing plan for 2009/10. It aims to move a total of 330 billion rupees from the market stabilisation scheme (MSS) in this year.

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The outstanding amount under the MSS account was 427.73 billion rupees on May 2, the RBI said. It has also bought back federal bonds in recent weeks to ensure adequate investor appetite for new auctions.

In early March, the central bank had given 120 billion rupees from the MSS account to the government to meet a sudden surge of borrowings in the closing weeks of the 2008/09 fiscal year.