Annual Report

Adhering to the broad objectives of cost optimisation, risk mitigation and market development, the Reserve Bank continued to manage market borrowing programmes of the central and state governments in a non-disruptive manner. During 2025-26, the government securities (G-secs) yields and the weighted average coupon on the entire outstanding debt stock decreased. The weighted average maturity of primary issuances by the central government also decreased. Issuances of sovereign green bonds (SGrBs) and ultra-long securities continued during the year.

VII.1 The Internal Debt Management Department (IDMD) of the Reserve Bank of India (RBI) under the RBI Act, 1934 is entrusted with the responsibility of managing the domestic debt of the central government (Sections 20 and 21), 28 state governments and three¹ union territories (UTs) [Section 21A]. In terms of Section 17(5), short-term credit up to three months is provided to bridge temporary mismatches in their cash flows.

VII.2 During 2025-26, the Reserve Bank ensured the completion of the market borrowing programme for both the central and state governments in a non-disruptive manner, with three broad objectives, viz., cost optimisation, risk mitigation and market development. During 2025-26, the weighted average yield of central government dated securities softened by 27 basis points (bps). The central government continued with issuance of SGrBs and ultra-long securities during 2025-26.

VII.3 The remainder of the chapter is organised under three sections. Section 2 presents the implementation status in respect of the agenda for 2025-26 along with major developments in the areas of debt management for both the central and state governments. Section 3 covers major initiatives to be undertaken in 2026-27, followed by concluding observations in the last section.

2. Agenda for 2025-26

VII.4 The Department had set out the following goals for 2025-26:

• Expanding the bidding and payment options available to retail investors under the RBI ‘Retail Direct’ portal/application (Paragraph VII.5); and

• Extending application programming interface (API) facility for seamless transfer of G-secs between demat accounts and Retail Direct Gilt (RDG) accounts (Paragraph VII.6).

Implementation Status

VII.5 An auto-bidding facility for treasury bills (T-Bills), covering both investment and re-investment options has been enabled in the RBI ‘Retail Direct’, which would help investors mandate automatic placement of bids in primary auction of T-Bills.

VII.6 API has been enabled to facilitate seamless value free on own account transfer of G-secs held by retail investors between the RDG accounts and demat account maintained with SEBI regulated depositories [National Securities Depository Limited and Central Depository Services (India) Limited].

Major Developments

Debt Management of the Central Government

VII.7 While gross market borrowings of the Government of India (GoI) through dated G-secs were higher by 4.3 per cent, net market borrowings were lower by 2.6 per cent in 2025-26 than in 2024-25. Net market borrowings through dated securities and T-Bills taken together were higher by 0.2 per cent during the year (Table VII.1).

Debt Management Operations

VII.8 The weighted average yield of G-secs issued during the year decreased by 27 bps and the weighted average coupon on the entire outstanding debt stock decreased by 8 bps, from the last year (Table VII.2). The weighted average maturity of primary issuances decreased while the outstanding debt increased on a year-on-year basis.

VII.9 There was no instance of devolvement on Primary Dealers (PDs) during 2025-26 as against two instances in the previous year. During the year, there were two instances of rejection of all bids for a notified amount of ₹16,000 crore (as compared to one such instance in 2024-25).

VII.10 G-sec yield curve steepened during the year. Short-term yields softened on the back of monetary policy easing, the Reserve Bank’s liquidity injection measures and sovereign credit rating upgrade by an international rating agency; while medium-term and long-term yields hardened tracking movement of sovereign yields in other countries amid intensification of geopolitical risks. Overall, the 10-year yield hardened by 49 bps in 2025-26 (Chart VII.1).

VII.11 During 2025-26, about 50.9 per cent of the market borrowing was raised through issuance of dated securities with a residual maturity of 10 years and above, in comparison with 55.3 per cent in the previous year (Table VII.3).

Treasury Bills (T-Bills)

VII.12 Short-term cash requirements of GoI are met through issuance of T-Bills. During 2025-26, the net short-term issuance of T-Bills was ₹(-)48,672 crore as against ₹(-)81,281 crore in the previous year.

Ownership of Securities

VII.13 Commercial banks remained the largest holders of G-secs [including T-Bills and state government securities (SGS)] accounting for 34.6 per cent (as at end-March 2026), followed by insurance companies (24.0 per cent), provident funds (10.9 per cent) and the Reserve Bank (10.9 per cent). The share of foreign portfolio investors was 1.8 per cent.

Primary Dealers (PDs)

VII.14 The number of PDs stood at 21 [14 bank-PDs and 7 standalone PDs (SPDs)], with a mandate to underwrite primary auction of dated G-secs and a target of achieving bidding commitment and success ratio in respect of primary auctions of T-Bills/cash management bills. The commission paid to PDs, including goods and services tax (GST), for underwriting during 2025-26 went up to ₹86.3 crore from ₹15.8 crore in the previous year. The average success ratio stood at 62.4 per cent in H1:2025-26 and 70 per cent in H2:2025-26. The share of amount allotted to PDs in auctions of T-Bills increased to 76.1 per cent during 2025-26 from 74.8 per cent during last year.

Floating Rate Savings Bond, 2020 (Taxable) [FRSB 2020 (T)] Scheme

VII.15 During 2025-26, ₹12,476 crore was raised through issuance of the FRSB 2020 (T); of which, ₹1,067 crore was raised through the Reserve Bank’s ‘Retail Direct’.

Cash Management of the Central Government

VII.16 The ways and means advances (WMA) limit of GoI was fixed at ₹1.5 lakh crore and ₹0.5 lakh crore for H1 and H2 of 2025-26, respectively, with the central government remaining in surplus during most part of the year. The central government resorted to WMA for one day during 2025-26 in comparison to eight days during the previous year (Chart VII.2).

Investments under Foreign Central Bank Scheme

VII.17 The Reserve Bank invests in Indian G-secs on behalf of select foreign central banks and multilateral development institutions by participating in the secondary market. Total volume transacted under the scheme increased to ₹735 crore (face value) during 2025-26 from ₹730 crore (face value) in the previous year.

Debt Management of State Governments

VII.18 The share of market borrowings in financing the gross fiscal deficit of states rose to 76.3 per cent in 2025-26 (BE) from 71.8 per cent in 2024-25 (RE).

VII.19 The gross market borrowings of states in 2025-26 stood at 95.1 per cent of the amount indicated in the quarterly indicative calendars. There were 1,055 issuances in 2025-26; of these, 217 were re-issuances (835 issuances in 2024-25, of which, 100 were re-issuances) [Table VII.4].

VII.20 The weighted average cut-off yield of SGS issuances during 2025-26 increased to 7.32 per cent from 7.20 per cent in the previous year (Table VII.5). The weighted average spread (WAS) of SGS issuances over comparable maturity of the central government securities increased to 50 bps in 2025-26 from 30 bps in the previous year. In 2025-26, 27 states and two UTs issued dated securities of tenors other than 10 years, ranging from 2 to 38 years. The average inter-state spread on securities of 10-year tenor (fresh issuances) was 8 bps in 2025-26, as against 4 bps in 2024-25.

VII.21 During 2025-26, 19 states/UTs have availed special drawing facility, 11 states/UTs resorted to WMA and 10 states/UTs were in overdraft on a few occassions.

VII.22 The outstanding investments of states/ UTs in 14-days intermediate treasury bills (ITBs), reflecting surplus cash balance, increased during 2025-26. States/UTs also invested in auction treasury bills (ATBs) through primary auctions using the non-competitive bidding facility (Table VII.6).

Investments in Consolidated Sinking Fund (CSF)/ Guarantee Redemption Fund (GRF) and Budget Stabilisation Fund (BSF)

VII.23 The Reserve Bank manages three reserve funds on behalf of member states/UTs, viz., CSF (26 states and two UTs), GRF (25 states and one UT) and BSF (two states). Outstanding investments by the member states in CSF and GRF as at end-March 2026 stood at ₹2,66,224 crore and ₹51,992 crore, respectively, as against ₹2,40,348 crore and ₹16,019 crore as at end-March 2025, respectively. Outstanding investments by the member states in BSF as at end-March, 2026 stood at ₹23,193 crore and ₹20,890 crore as at end-March 2025, respectively.

VII.24 During 2025-26, capacity building programmes on cash and debt management were conducted for eight states/UTs. In addition, a two-day workshop on cash and debt management was also conducted at the Reserve Bank’s College of Agricultural Banking, Pune.

VII.25 The Reserve Bank has been sensitising states about the adoption of Benchmark Issuance Strategy (BIS) for their market borrowings, for improving the transparency and providing greater clarity to investors. This strategy would involve issuing securities in specific benchmark tenor buckets as per the pre-announced calendar. Based on the concurrence received from state governments, it has been decided to introduce the BIS, on a pilot basis for nine² state governments starting from 2026-27.

VII.26 The Reserve Bank has been encouraging states to adopt a medium-term debt management strategy (MTDS)³ that would essentially cover development of a prudent debt management strategy consistent with government’s preferences for cost/risk trade-offs.

3. Agenda for 2026-27

VII.27 During 2026-27, the market borrowing programme is proposed to be conducted with the following strategic milestones for achieving overall debt management:

• Comprehensive review of extant schemes for non-competitive bidding in G-secs, T-Bills and SGS;

• Onboarding of ‘Retail Direct’ holdings under the account aggregator framework; and

• Sensitising remaining states/UTs to adopt Benchmark Issuance Strategy, which has already been adopted by nine state governments.

4. Conclusion

VII.28 During the year, the market borrowings of the central and state governments were completed successfully amidst global financial volatility and geopolitical tensions. The market borrowing programme for 2026-27 will be managed in an orderly manner considering the government’s fiscal deficit goals and evolving market conditions.

¹ On January 5, 2026, RBI entered into an agreement with the Government of National Capital Territory of Delhi.

² Andhra Pradesh, Bihar, Chhattisgarh, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Uttar Pradesh.

³ It involves comprehensive assessment of the existing debt portfolio, evaluation of its composition (internal versus external, short-term versus long-term), debt servicing profiles, and vulnerabilities. The strategy prescribes adjustments to debt composition, modifying instrument structures to address identified risks and ensure fiscal sustainability.

Index