The Telegraph
Since 1st March, 1999
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Govt sets July date for buyback of select gilts

Mumbai, June 7 (PTI): The first auction for the proposed buyback of 24 illiquid Government of India securities from banks, which was expected to take place by June-end, is now likely to materialise in July, a senior Reserve Bank official said today.

“It (auction) is not possible to happen by June end as there is a slight delay in implementation of the software and so it could happen next month,” RBI executive director Usha Thorat told reporters here on the sidelines of a seminar on ‘Integration of securites settlement & payment systems in india’ organised by Business Asia Consulting.

Since it was going to be a live auction, RBI would like to have everything in place and conduct a trial run, she said.

In a bid to improve balance sheets of banks and financial institutions, the government has proposed to buy back 24 illiquid GoI securities of Rs 82,523 crore face value.

Union finance secretary S. Narayan, last month, had said RBI was to prepare a software for screen-based price auction and first such transaction was likely to happen by June end.

This was a voluntary and transparent buyback programme where the premium would be paid in cash and for the balance amount, the government would issue new securities with the tenure varying between 5-20 years at fixed interest rate, he had said.

Apart from aiding the Centre to reduce interest burden, the buyback and issuance of new securities would help banking entities to build portfolio of liquid instruments and make provision for non-performing assets, Narayan had said.

RBI chief general manager, department of information technology, R. Gandhi said the real time gross settlement (RTGS) system, which is primarily meant for settlement of interbank transactions, was expected to go live by end of 2003.

The apex bank would receive the demonstrable version from the vendor by June 21 and training of bank employees would happen in July-August, he said.

After commencing the mock trials in September, the vendor would deliver the full fledged version in October and RBI would run parallel operations in late October and November, he added.

Gandhi said full membership would be given to all scheduled commercial banks while for primary dealers it would a restricted membership.

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