Government to roll out 40-year bonds to raise funds

NEW DELHI: For the first time, the government will launch 40-year bonds to raise funds and help pension funds and insurance companies park long-term resources.
The move came along with the finalization of the first half borrowing calendar for 2015-16 with the government expected to raise Rs 3.6 lakh crore, which is a little over 60% of the gross borrowings budgeted at Rs 5.92 lakh crore.Typically, the Centre frontloads the borrowings and completes around two-thirds of its market fund-raising between April and September.
Finance secretary Rajiv Mehrishi told reporters that a larger proportion of the market borrowings takes place in the first half as revenue receipts during this period are slow and it also helps in redemption of earlier loans.
In addition, RBI and the finance ministry on Monday decided to issue treasury bills, which have shorter maturity periods than government bonds, of Rs 1.88 lakh crore in the first quarter. In addition, Mehrishi said that around Rs 50,000 crore of bonds will be switched — tenures and interest rates will be reworked — during the year.
The finance secretary said the government will raise less than Rs 10,000 crore through 40-year papers in early next financial year. “It will help us in the long run and will provide stability in the system.”
Rajat Bhargava, joint secretary in charge of budget, said countries such as the UK have long tenure bonds of 50-60 years and studies conducted by the finance ministry as well as RBI had shown that there is a demand for such papers.
Although retail investors can buy government bonds, a majority of the securities are lapped up by banks and insurance companies.