RBI announces underwriting auction results for two government securities worth Rs 32,000
Mumbai, August 7
The Reserve Bank of India on Friday announced the results of the underwriting auction conducted for Additional Competitive Underwriting of two Government of India securities, setting cut-off commission rates for primary dealers.
According to the central bank, the auction was held today for the 6.36 per cent Government Security (GS) maturing in 2031 and a 7.71 per cent Government Security (GS) maturing in 2066.
The ACU process allows primary dealers to competitively bid for the right to underwrite additional portions of the notified amount of government bonds, over and above their minimum underwriting commitments.
For the 6.36 per cent GS 2031, the notified amount was Rs 21,000 crore. The minimum underwriting commitment (MUC) stood at Rs 10,500 crore, with the remaining Rs 10,500 crore accepted under ACU. The cut-off commission rate for the ACU portion was set at Rs 0.28 per Rs 100.
In the case of the 7.71 per cent GS maturing in 2066, the notified amount was Rs 11,000 crore. The MUC was Rs 5,502 crore, while the ACU amount accepted was Rs 5,498 crore. For this, the ACU commission cut-off rate was 0.68 paise per Rs 100.
Underwriting of government securities is a critical function performed by primary dealers to ensure smooth borrowing operations by the government. In this system, primary dealers commit to subscribing to unsold portions of government bond issuances, thereby assuring full subscription.
The ACU mechanism allows the government to allocate additional underwriting amounts through a competitive bidding process, where the commission rate is determined based on market demand.
The RBI's announcement comes as part of its routine government securities issuance calendar, which is a key instrument for managing the fiscal requirements of the government and influencing liquidity in the financial system.
Primary dealers, a select set of financial institutions authorised by the RBI, play an essential role in underwriting and distributing these securities in the secondary market.
— ANI
Reader Comments
Another borrowing exercise... I understand it's routine, but I wish we could see more transparency about where all this borrowed money is actually going. Taxpayers deserve to know how these funds are being utilized for development. 🤔
The ACU mechanism seems efficient. Competitive bidding ensures market-determined commissions. Nice to see RBI's structured approach to managing the government's borrowing calendar. Primary dealers definitely have an important job here!
Interesting to see India's bond market dynamics from abroad. The 2066 bond maturity is impressively long. Shows confidence in India's growth story over the next few decades. 🇮🇳
At the end of the day, this is about managing government debt. The commission rates seem minimal which is good for taxpayers. But I do wonder - are we borrowing too much? Need to balance fiscal stimulus with long-term debt sustainability. 💭
Solid market infrastructure. The underwriting auction process ensures liquidity and reduces risk of undersubscription. India's financial system is maturing well under RBI's guidance.
I appreciate the detailed breakdown of the numbers. ₹32,000 crore is no small amount - it's crucial that the underwriting process remains competitive to ensure the best rates for the government
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