Quarterly Report on Debt Management

Quarterly Report on Debt Management for the Quarter January-March 2016 (Q 4 FY 16) released; Gross and Net Market borrowing requirements of the Government for FY16 were revised lower to Rs. 5,85,000 crore and Rs. 4,40,608 crore, which were lower by 1.18 per cent and 2.75 per cent respectively than Rs. 5,92,000 crore and Rs. 4,53,205 crore in FY15


Since April-June (Q1) 2010-11, Middle Office (MO), Budget Division, Department of Economic Affairs, Ministry of Finance, is bringing-out a Quarterly Report on Debt Management on regular basis. The Current Report pertains to the Quarter January-March 2016 (Q 4 FY 16).

            During Q4 of FY16, the Government issued dated securities worth Rs. 84,000 crore to complete its gross borrowings of Rs. 5,85,000 crore for FY 16. Gross and Net Market borrowing requirements of the Government for FY16 were revised lower to Rs. 5,85,000 crore and                   Rs. 4,40,608 crore, which were lower by 1.18 per cent and 2.75 per cent, respectively, than Rs. 5,92,000 crore and Rs. 4,53,205 crore in FY15. Auctions during Q4 of FY16 were held broadly in accordance with the pre-announced calendar. The weighted average maturity of primary issuance was kept long during this quarter and stood at 15.74 years, however, it was lower than Q3 FY 16 (16.72 years) due to market conditions.  The weighted average yield (cut-off) of issuance during Q4 of FY16, was at 7.89 per cent as against 7.70 per cent in Q3 of FY16, reflecting some hardening in yields during the quarter. The cash position of the Government during Q4 of FY16 was comfortable and remained in surplus mode during the quarter. The issuance amount under Treasury bills was also broadly as per calendar.

           The Public Debt (excluding liabilities under the ‘Public Account’) of the Central Government provisionally decreased marginally. Internal debt constituted 92.0 per cent of public debt as at end-March 2016, while marketable securities accounted for 84.8 per cent of public debt.  About 26.9 per cent of outstanding stock has a residual maturity of up to 5 years, which implies that over the next five years, on an average, around 5.4 per cent of outstanding stock needs to be rolled over every year. Thus, the rollover risk in the debt portfolio continues to be low. The implementation of budgeted buy back/ switches in coming quarters is expected to reduce roll over risk further.

  G-sec yields witnessed significant intra-quarter movements. G-Sec market opened the quarter on weak note tracking the depreciating domestic currency and local equity market. The market sentiment was adversely affected in February due to higher than expected inflation numbers, hardening bias in US Treasuries, higher borrowings of states, uncertainties over issuance of UDAYA bonds, etc., and 10-year G-sec yield touched a high of 7.85%, general levels last seen in June 2015. Since February end, the market reversed its direction and gained significantly post budget on positive market sentiment. 10 Yr benchmark paper closed the quarter at 7.46%, lowest yield level since July 2013 as against 7.69% on December 31, 2015.   In Q4 FY 16, Central Government dated securities continued to account for a dominant portion of total trading volumes.

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Comments and suggestions sought from stakeholders and general public on draft rules and forms prepared for determination of fair market value of Indian and global assets and the manner for reporting requirement on the Indian concern in which the foreign company or entity holds the assets in India

Under Section 9 of the Income-tax Act, 1961 (the Act), income arising from indirect transfer of assets situated in India is deemed to accrue or arise in India. The provisions of Section 9(1)(i) of the Act provides that if any share of or interest in, a foreign company or entity derives its value substantially from the assets located in India, then such share or interest is deemed to be situated in India. Thereby, any income arising from transfer of such share or interest is deemed to accrue or arise in India.

            The share or interest is said to derive it value substantially from assets located in India, if fair market value (FMV) of assets located in India comprise at least 50% of the FMV of total assets of the company or entity. The computation of FMV of Indian and global assets is to be in the prescribed manner.

            Further, Section 285A of the Act mandates reporting requirement on the Indian concern through or in which the foreign company or entity holds the assets in India. The information to be furnished and its manner is also required to be prescribed.

            In this regard, draft rules and forms to be incorporated in the Income-tax Rules, 1962 have been formulated and uploaded on the Finance Ministry’s website (www.finmin.nic.in) and website of the Income-tax Department (www.incometaxindia.gov.in) for comments from stakeholders and general public.

            The comments and suggestion on the draft rules may be sent by 29th May, 2016 electronically at the email address, ustpl1@nic.in.

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Auction for Sale (Re-issue) of Government Stocks

The Government of India have announced the Sale (re-issue) of (i) “7.35 per cent Government Stock 2024” for a notified amount of Rs. 3,000 crore (nominal) through price based auction, (ii) “7.61 per cent Government Stock 2030” for a notified amount of Rs. 8,000 crore (nominal) through price based auction, (iii) “7.50 per cent Government Stock 2034” for a notified amount of Rs. 2,000 crore (nominal) through price based auction, and (iv) “7.72 per cent Government Stock 2055” for a notified amount of Rs. 2,000 crore (nominal) through price based auction. The auctions will be conducted using multiple price method. The auctions will be conducted by the Reserve Bank of India (RBI), Mumbai Office, Fort, Mumbai on May 27, 2016 (Friday).

Up to 5% of the notified amount of the sale of the stocks will be allotted to eligible individuals and Institutions as per the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities.