The Telegraph
Since 1st March, 1999
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Guidelines for gilts buyback soon

New Delhi, March 30 (PTI): The government will soon come out with detailed guidelines for buying back high-cost securities worth over Rs 40,000 crore from banks and FIs during 2003-04, as part of efforts to reduce interest burden and fiscal deficit.

“In consultation with the Reserve Bank, we are framing the guidelines for buying back of high-cost government securities from banks and financial institutions. It will be issued by the RBI next month,” a finance ministry official said.

The Centre hopes to buy back about Rs 40,000 crore worth of high-cost debts from banks and FIs.

“The government will buy back the securities bearing high interest rate at the market price,” he said. The government would provide tax exemptions to banks and FIs whose G-secs would be bought back.

The scheme would also enable banks and FIs to provide higher amounts for non-performing assets estimated at over Rs 1,10,000 crore.

Official sources said this scheme along with the Rs 80,000 crore debt swap scheme for states and prepayment of costly foreign loans, would help the Centre to reduce its interest burden now at over Rs 1,15,600 crore and estimated to mount to Rs 1,23,223 crore in 2003-04.

Interest burden was one of the main components of the Centre's non-plan spendings that was growing over the years and increasing fiscal deficit estimated at 1,45,466 crore (5.9 per cent of GDP) for 2002-03.

The fiscal deficit is pegged at Rs 1,53,637 crore or 5.6 per cent of GDP for 2003-04.

Market sources said many of the securities which may be bought back by the government have coupon rates of over 10 per cent. Some of these are — 11.40 per cent GoI 2008, 11.50 per cent GoI 2010, 11.03 per cent GoI 2012, 10.71 per cent GoI 2016, 10.25 per cent GoI 2021 and 10.18 per cent GoI 2026.

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