The Central Government has something called a fiscal deficit. This has to be funded. The market borrowing of the Central Government is met by issuing dated securities (called G Sec) and 364 day Treasury Bills. This is normally done by issue of a slew of G Secs, T bills, by holding auctions.

Money is raised by auctions, floating of fixed coupon loans, private placements, as well as other open market operations…etc.,


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  1. Jagbir, banks have to buy g-secs as part of “SLR” requirements. That is, 24% of all deposits in banks must be in G-Secs. Considering that the deposit base of India is around 55 lakh crore, about 13 lakh cr. in G-Secs is guaranteed. Additionally, pension funds, insurance companies and other such long term funds may be required to buy G-Secs. Finally, foreign investors are permitted to buy around $10 bn in G-Secs (not more, though).

    Auctions happen every week on Friday for new G-Secs, and there are “underwriters” for each auction (a set of folks called Primary Dealers, these are mostly arms of banks and large financial companies). If there is a shortage of bidders for any security, the underwriters must buy – the shortage “devolves” on the underwriters.

    Hope this helps!

  2. what about the Oil bonds type of off balance sheet instruments? which chidduji cleverly introduced to reduce the balance sheet (he might have honed these techniques while working as a lawyer for enron india).
    i wonder if the indian govt will be considered a going concern if audited by GAAP standards

  3. Subra Sir and Deepak

    Great info. Would love to learn more on the risks associated with indian banks, especially between nationalised and private with these controls in place.


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