India's Major Market Borrowing Plan for First Half of FY27
The Indian government has announced a substantial market borrowing plan for the first half of the fiscal year 2026-27, targeting Rs 8.20 lakh crore through dated securities. This amount represents over half of the revised annual borrowing programme, as confirmed by the finance ministry on Friday. The borrowing initiative is strategically designed to fund the fiscal deficit and address revenue gaps, with a portion allocated to environmentally focused investments.
Revised Borrowing Framework and Green Bond Inclusion
Initially, the Union Budget for FY27 had projected gross market borrowings at Rs 17.20 lakh crore. However, after adjustments through switches of government securities (G-Secs), the revised borrowing target now stands at Rs 16.09 lakh crore. Of this total, Rs 8.20 lakh crore, accounting for 51%, is scheduled for the April–September period of 2026-27. Notably, this includes Rs 15,000 crore earmarked for Sovereign Green Bonds (SGrBs), highlighting the government's commitment to sustainable financing.
Auction Structure and Maturity Distribution
The borrowing will be executed through 26 weekly auctions, with amounts varying between Rs 28,000 crore and Rs 34,000 crore per auction. Securities will be issued across a diverse range of maturities to cater to different investor preferences and market conditions. The maturity breakdown includes 3-year, 5-year, 7-year, 10-year, 15-year, 30-year, 40-year, and 50-year tenures.
Key highlights of the maturity distribution:
- The 10-year segment will dominate with the largest share at 29%.
- This is followed by the 5-year tenure at 15.4% and the 15-year tenure at 14.5%.
- Other tenures include 3-year and 7-year at 8.1% each, 30-year at 7.3%, 40-year at 8%, and 50-year at 9.6%.
Enhancing Retail Participation and Flexibility
To boost market involvement, the government has reserved 5% of the notified amount in each auction for retail investors under the non-competitive bidding route. This move aims to democratize access to government securities and encourage broader public investment. Additionally, the Centre will maintain flexibility to adjust the borrowing calendar based on evolving market dynamics. Potential modifications may include changes in issuance size, maturities, and the introduction of instruments such as floating rate bonds (FRBs) and inflation indexed bonds (IIBs).
Operational Mechanisms and Treasury Bill Borrowings
Switch and buyback operations will continue to be employed to smoothen the redemption profile of government securities. Specifically, switches of dated securities through auction are scheduled for the third Monday of each month, or more frequently if needed. In instances where the third Monday is a holiday, the auction will shift to the fourth Monday. The government will also retain a greenshoe option, allowing it to accept additional subscriptions of up to Rs 2,000 crore per security to manage demand effectively.
Separately, weekly Treasury Bill (T-Bill) borrowings in the first quarter are projected at Rs 24,000 crore over 12 weeks. This includes Rs 12,000 crore in 91-day T-Bills, and Rs 6,000 crore each in 182-day and 364-day instruments, providing short-term liquidity management tools.
Fiscal Deficit Financing and WMA Limits
In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman projected a fiscal deficit of 4.3% of GDP, equivalent to Rs 16.9 lakh crore. To finance this deficit, net market borrowings from dated securities are estimated at Rs 11.7 lakh crore, with the remaining balance expected to come from small savings and other sources. Gross market borrowings are pegged at Rs 17.2 lakh crore, aligning with the broader fiscal strategy.
To address temporary cash mismatches, the Reserve Bank of India has set the Ways and Means Advances (WMA) limit for the first half of FY27 at Rs 2.50 lakh crore. This provision ensures liquidity support and operational efficiency in government finances, reinforcing the stability of India's economic framework amidst global uncertainties.
