Govt swaps ₹1.2-lakh-cr G-Secs oil bonds

Govt swaps ₹1.2-lakh-cr G-Secs oil bonds

Topic: Economy

In News: In the run-up to the Budget for FY23, the Union government did a conversion transaction for G-Secs and oil bonds with RBI on January 28 for ₹1,19,701 crore.

About:

• The transaction involved buying back securities maturing in FY2022-23, FY2023-24 and FY2024- 25 from the RBI and issuing fresh securities for equivalent market value, to make the transaction cash-neutral.
• Conversion of G-Secs maturing in the next three financial years into new G-Secs maturing at a later date will ease the redemption pressure on the government.
• Of the six G- Secs (aggregating ₹63,648 crore) maturing in 2022, three each were converted into G-Secs maturing in 2028 and 2029, respectively.
• The GoI Floating Rate Bond maturing in 2024 (aggregating ₹27,330 crore) has been converted into a G-Sec maturing in 2035.

Oil bonds

• Six oil bonds maturing between 2023 and 2025, were converted into G-Secs maturing in 2030
• The oil bonds were issued by the previous UPA regime as compensation to oil marketing companies in lieu of cash subsidies.
• Bidding in the auction for conversion implies that the market participants agree to sell the source security/ies to the government and simultaneously agree to buy the destination security from the government.