Government's H1 FY 2024-25 Borrowing Plan: Strategic Financial Management

Summary and Important Points:

1. Borrowing Strategy:

• Government's borrowing plan for H1 FY 2024-25 is set at ₹7.50 lakh crore, 53.08% of the total ₹14.13 lakh crore budgeted for the year.

1. Innovative Financial Instruments:

• Introduction of a new 15-year tenor dated security and the issuance of ₹12,000 crore through Sovereign Green Bonds (SGrBs).

1. Diverse Maturity Portfolio:

• Borrowings will span across various maturities: 3-year to 50-year securities, ensuring a balanced maturity profile.

1. Market Adaptability:

• The plan includes feedback-based decisions and global best practices, showcasing adaptability to market needs.

1. Security Switching:

• Continued practice of switching securities to manage the redemption profile effectively.

1. Greenshoe Option:

• A greenshoe option will allow the government to retain additional subscriptions up to ₹2,000 crore for each security.

1. Treasury Bills and WMA Limit:

• Weekly borrowing through Treasury Bills detailed, with a WMA (Ways and Means Advances) limit set at ₹1.50 lakh crore for managing temporary account mismatches.

Additional Information:

• Sovereign Green Bonds (SGrBs): Bonds issued by the government to fund environmentally friendly projects.

• Dated Securities: Long-term government securities with a fixed maturity date.

• Greenshoe Option: An option that allows the issuer to sell more shares than originally planned if the demand is higher than expected.

• Ways and Means Advances (WMA): Temporary loan facilities provided by the RBI to the government to bridge short-term mismatches in receipts and payments.

Examination Perspective and Concise Points for Use:

• Understanding the government's financial strategy and the role of diverse securities in managing the national budget.

• The significance of Sovereign Green Bonds in promoting sustainable development.

• The importance of the greenshoe option in financial markets and government borrowing.

• Ways and Means Advances (WMA) as a tool for financial liquidity management by the government.

Key Words to Remember:

• Government Borrowing

• Sovereign Green Bonds

• Dated Securities

• Greenshoe Option

• Ways and Means Advances (WMA)

Link to Article : Press Information Bureau (pib.gov.in)

Released On : 27 March 2024