CHAPTER VII: PUBLIC DEBT MANAGEMENT - Revision

 RBI Annual Report 2025-26

CHAPTER VII: PUBLIC DEBT MANAGEMENT

PART 1: COMPLETE REVISION NOTE

1. Role of RBI and IDMD

The Internal Debt Management Department (IDMD) of RBI manages domestic debt of the Central Government under Sections 20 and 21 of the RBI Act, 1934, and of 28 State Governments and 3 Union Territories under Section 21A. Under Section 17(5), RBI provides short-term credit up to 3 months to bridge temporary cash-flow mismatches. On January 5, 2026, RBI entered into an agreement with the Government of National Capital Territory of Delhi.

During 2025-26, RBI completed Central and State government market-borrowing programmes non-disruptively, guided by three objectives: cost optimisation, risk mitigation and market development. Central G-sec weighted average yield softened by 27 bps; yields and weighted average coupon on the outstanding debt stock declined, while issuance of sovereign green bonds (SGrBs) and ultra-long securities continued.

2. Agenda for 2025-26 and Implementation

·        Retail Direct: enabled auto-bidding in T-Bills for both investment and re-investment, allowing automatic placement of bids in primary T-Bill auctions.

·        API facility: enabled seamless value-free own-account transfer of G-secs between Retail Direct Gilt (RDG) accounts and demat accounts maintained with SEBI-regulated depositories, NSDL and CDSL.

3. Central Government Debt Management

Gross market borrowings through dated G-secs increased 4.3% in 2025-26, while net market borrowings were lower 2.6% than in 2024-25. Net borrowings through dated securities plus T-Bills increased 0.2%.

Central Government borrowing	2024-25	2025-26
Gross market borrowings through dated securities (₹ crore)	14,00,697	14,61,000
Net market borrowings (₹ crore)	10,81,598	10,84,162
Net dated securities (₹ crore)	11,62,879	11,32,834
Net 91-day T-Bills (₹ crore)	72,713	-52,936
Net 182-day T-Bills (₹ crore)	-55,896	13,596
Net 364-day T-Bills (₹ crore)	-98,098	-9,333

 

·        Weighted average yield of G-secs issued fell 27 bps; weighted average coupon on outstanding debt fell 8 bps. Weighted average maturity of primary issuances decreased, while outstanding debt increased.

·        No devolvement on Primary Dealers (PDs) occurred in 2025-26, versus 2 in 2024-25. There were 2 instances of rejection of all bids for a notified ₹16,000 crore amount, versus 1 in 2024-25.

·        G-sec yield curve steepened. Short-term yields softened due to monetary easing, RBI liquidity injection and a sovereign credit-rating upgrade; medium/long-term yields hardened amid higher overseas sovereign yields and geopolitical risks. The 10-year yield hardened by 49 bps.

·        50.9% of market borrowing came through dated securities with residual maturity of 10 years and above, versus 55.3% in 2024-25.

EXAM ALERT: 27 bps = fall in weighted average yield of G-secs issued; 8 bps = fall in weighted average coupon on outstanding debt; 49 bps = rise in 10-year yield.

4. Market Loans of the Central Government: 2025-26 Profile

Measure	2025-26
Weighted average yield of primary issues	6.69%
Range of maturities of fresh/re-issued securities	3-50 years
Weighted average maturity of issuances	18.88 years
Weighted average maturity of outstanding stock	13.70 years
Weighted average coupon of outstanding stock	7.17%
Cut-off yield ranges: <5 years	5.69-6.47%
Cut-off yield ranges: 5-10 years	6.01-6.72%
Cut-off yield ranges: >10 years	6.50-7.49%

 

5. Treasury Bills, Ownership and Primary Dealers

·        T-Bills meet short-term cash requirements of GoI. Net short-term T-Bill issuance in 2025-26 was (-)₹48,672 crore, compared with (-)₹81,281 crore in 2024-25.

·        As at end-March 2026, commercial banks were the largest G-sec holders at 34.6%, followed by insurance companies 24.0%, provident funds 10.9% and RBI 10.9%; foreign portfolio investors held 1.8%.

·        PDs numbered 21: 14 bank-PDs and 7 standalone PDs (SPDs). Their mandate includes underwriting primary auctions of dated G-secs and achieving bidding-commitment/success-ratio targets for T-Bills and cash management bills.

·        Underwriting commission to PDs, including GST, rose to ₹86.3 crore in 2025-26 from ₹15.8 crore in 2024-25. Average success ratio was 62.4% in H1 and 70% in H2 of 2025-26. PD share of T-Bill auction allotments increased to 76.1% from 74.8%.

Floating Rate Savings Bond, 2020 (Taxable)

₹12,476 crore was raised through FRSB 2020 (T) during 2025-26; ₹1,067 crore was raised through RBI's Retail Direct.

6. Cash Management of Central Government

WMA limits were fixed at ₹1.5 lakh crore for H1 and ₹0.5 lakh crore for H2 of 2025-26. The Central Government remained in surplus for most of the year and used WMA for only 1 day, versus 8 days in the previous year.

Foreign Central Bank Scheme

RBI invests in Indian G-secs on behalf of select foreign central banks and multilateral development institutions through secondary-market participation. Total volume transacted increased to ₹735 crore face value in 2025-26 from ₹730 crore in 2024-25.

7. Debt Management of State Governments

·        Share of market borrowings in financing states' gross fiscal deficit rose to 76.3% in 2025-26 (BE) from 71.8% in 2024-25 (RE).

·        Gross State market borrowings were 95.1% of the amount indicated in quarterly indicative calendars. There were 1,055 issuances, including 217 re-issuances, versus 835 and 100 respectively in 2024-25.

·        Weighted average cut-off yield of SGS rose to 7.32% from 7.20%; weighted average spread over comparable Central G-secs rose to 50 bps from 30 bps.

·        In 2025-26, 27 states and 2 UTs issued dated securities with tenors other than 10 years, ranging 2-38 years. Average inter-state spread on fresh 10-year securities rose to 8 bps from 4 bps.

·        19 states/UTs availed Special Drawing Facility, 11 resorted to WMA and 10 were in overdraft on some occasions.

·        Outstanding state/UT investments in 14-day ITBs increased during 2025-26; states/UTs also invested in ATBs through primary auctions using non-competitive bidding.

State SGS profile	2025-26
Gross sanctions under Article 293(3), ₹ crore	13,63,263
Gross amount raised, ₹ crore	12,76,430
Redemptions, ₹ crore	3,72,543
Net amount raised, ₹ crore	9,03,887
Amount raised / total sanctions	93.6%
Outstanding, ₹ crore	73,03,451
Weighted average yield	7.32%
Weighted average maturity of issuance	14.87 years
Weighted average maturity of outstanding stock	9.62 years
Weighted average coupon	7.37%

 

EXAM ALERT: Central vs State: Central G-sec issuance W.A. yield = 6.69%; State SGS W.A. yield = 7.32%. State SGS spread = 50 bps.

8. State Reserve Funds and Debt Strategy

RBI manages three reserve funds for member states/UTs: Consolidated Sinking Fund (CSF), Guarantee Redemption Fund (GRF) and Budget Stabilisation Fund (BSF). CSF covers 26 states + 2 UTs; GRF 25 states + 1 UT; BSF 2 states.

Fund / investment	End-March 2025	End-March 2026
CSF + GRF investments, ₹ crore	2,40,348	2,66,224
BSF investments, ₹ crore	16,019	23,193

 

RBI conducted cash/debt-management capacity-building programmes for 8 states/UTs and a two-day workshop at the College of Agricultural Banking, Pune.

Benchmark Issuance Strategy (BIS)

BIS uses pre-announced benchmark-tenor buckets to improve transparency and investor clarity. RBI decided to introduce BIS on a pilot basis for 9 state governments from 2026-27: Andhra Pradesh, Bihar, Chhattisgarh, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Uttar Pradesh.

RBI also encourages states to adopt Medium-Term Debt Management Strategy (MTDS), involving assessment of the existing debt portfolio, debt composition, refinancing and rollover risks, vulnerabilities, and adjustments to debt composition/maturity to achieve prudent cost-risk trade-offs.

9. Agenda for 2026-27

·        Comprehensively review schemes for non-competitive bidding in G-secs, T-Bills and SGS.

·        Onboard Retail Direct holdings under the Account Aggregator framework.

·        Sensitise remaining states/UTs to adopt BIS; 9 state governments have already adopted it.

·        Manage 2026-27 Central and State borrowing programmes in an orderly manner, considering fiscal-deficit goals, evolving market conditions and geopolitical/global financial volatility.

10. Conclusion

2025-26 borrowing programmes of the Central and State governments were completed successfully amid global financial volatility and geopolitical tensions. Debt management remained anchored in cost optimisation, risk mitigation and market development, with continued use of green/ultra-long securities, retail access and improved state-level debt-management practices.

PART 2: IMPORTANT NUMBERS

Topic	Figure	Meaning
Central Govt debt responsibility	28 States + 3 UTs	IDMD debt management scope; plus Central Government
Short-term RBI credit	Up to 3 months	Bridge temporary cash mismatch
Central gross dated G-sec borrowing	₹14,61,000 crore	2025-26
Central net market borrowing	₹10,84,162 crore	2025-26
Gross borrowing growth	4.3%	2025-26 vs 2024-25
Net borrowing change	-2.6%	2025-26 vs 2024-25
G-sec W.A. yield change	-27 bps	2025-26
Outstanding debt W.A. coupon change	-8 bps	2025-26
10-year yield change	+49 bps	2025-26
Borrowing with ≥10-year residual maturity	50.9%	2025-26
T-Bill net short-term issuance	-₹48,672 crore	2025-26
Commercial-bank G-sec holding	34.6%	End-March 2026
Insurance-company holding	24.0%	End-March 2026
PDs	21	14 bank-PDs + 7 SPDs
PD success ratio	62.4% / 70%	H1 / H2 2025-26
PD T-Bill allotment share	76.1%	2025-26
FRSB 2020(T) raised	₹12,476 crore	2025-26
FRSB via Retail Direct	₹1,067 crore	2025-26
Central WMA limit	₹1.5 lakh crore / ₹0.5 lakh crore	H1 / H2
Central WMA use	1 day	2025-26
Foreign Central Bank Scheme	₹735 crore	Face value transacted
State market borrowing share of GFD	76.3%	2025-26 BE
State gross borrowing vs calendar	95.1%	2025-26
State issuances	1,055; 217 re-issues	2025-26
State SGS W.A. yield	7.32%	2025-26
State SGS spread	50 bps	Over comparable Central G-secs
Non-10-year State securities	2-38 years	27 States + 2 UTs
Article 293(3) gross sanctions	₹13,63,263 crore	2025-26
State net amount raised	₹9,03,887 crore	2025-26
State outstanding debt	₹73,03,451 crore	End-2025-26
CSF coverage	26 States + 2 UTs	RBI-managed reserve fund
GRF coverage	25 States + 1 UT	RBI-managed reserve fund
BSF coverage	2 States	RBI-managed reserve fund
CSF + GRF investments	₹2,66,224 crore	End-March 2026
BSF investments	₹23,193 crore	End-March 2026
BIS pilot	9 States	From 2026-27

 

PART 3: IMPORTANT DATES

Date/Year	Event
1934	RBI Act; Sections 20, 21 and 21A govern debt-management responsibilities
January 5, 2026	RBI agreement with Government of National Capital Territory of Delhi
2025-26	Retail Direct T-Bill auto-bidding and G-sec transfer API enabled
2025-26	WMA used by Central Government for 1 day
2025-26	State borrowing: 1,055 issuances, 217 re-issuances
From 2026-27	BIS pilot for 9 state governments
2026-27	Retail Direct holdings proposed for Account Aggregator framework
2026-27	Review of non-competitive bidding schemes for G-secs, T-Bills and SGS

 

PART 4: IMPORTANT RBI / GOI / OTHER INITIATIVES

Initiative	Organisation	One-line purpose/key fact
Retail Direct	RBI	Retail investor access to G-secs; T-Bill auto-bidding enabled
Retail Direct API	RBI	Value-free own-account transfer between RDG and demat accounts
Sovereign Green Bonds	GoI/RBI debt management	Continued issuance during 2025-26
Ultra-long securities	GoI/RBI debt management	Continued issuance during 2025-26
Foreign Central Bank Scheme	RBI	Invests in Indian G-secs for select foreign central banks/MDIs
BIS	RBI + State Governments	Benchmark-tenor issuance strategy; pilot in 9 states from 2026-27
MTDS	RBI + State Governments	Medium-term debt strategy balancing cost and risk
CSF	RBI + States/UTs	Sinking fund for debt redemption
GRF	RBI + States/UTs	Guarantee redemption reserve fund
BSF	RBI + States	Budget stabilisation reserve fund
Non-competitive bidding	RBI	Access mechanism for specified investors; 2026-27 review proposed
Account Aggregator integration	RBI	Proposed onboarding of Retail Direct holdings under AA framework

 

PART 5: KEY DEFINITIONS / CONCEPTS

Term	Meaning
IDMD	Internal Debt Management Department of RBI; manages domestic debt of Central and specified State/UT governments
G-sec	Government security issued by Central Government
SGS	State Government Securities
T-Bill	Short-term government security used to meet short-term cash requirements
WMA	Ways and Means Advances; short-term accommodation for temporary cash-flow mismatches
SDF	Special Drawing Facility available to State Governments/UTs
PD	Primary Dealer; underwrites/participates in primary G-sec auctions and supports market development
SPDs	Standalone Primary Dealers
RDG account	Retail Direct Gilt account under RBI Retail Direct
BIS	Benchmark Issuance Strategy using pre-announced benchmark-tenor buckets
MTDS	Medium-Term Debt Management Strategy addressing debt composition, refinancing/rollover risk and cost-risk trade-offs
CSF	Consolidated Sinking Fund
GRF	Guarantee Redemption Fund
BSF	Budget Stabilisation Fund
ATB	Auction Treasury Bill
ITB	Intermediate Treasury Bill, including 14-day ITB referred to in the chapter
Article 293(3)	Constitutional provision relevant to State borrowing/consent framework reflected in Table VII.4

 

PART 6: CONFUSION POINTS

Confusion	Correct distinction
27 bps vs 49 bps	27 bps = fall in W.A. yield of G-secs issued; 49 bps = rise in 10-year yield
6.69% vs 7.32%	6.69% = Central Government dated G-sec W.A. yield; 7.32% = State SGS W.A. cut-off yield
8 bps	Fall in W.A. coupon on entire outstanding Central Government debt stock
50 bps	State SGS W.A. spread over comparable Central G-secs in 2025-26
50.9% vs 55.3%	Share of Central borrowing through ≥10-year residual maturity in 2025-26 vs 2024-25
₹1.5 lakh crore vs ₹0.5 lakh crore	Central Government WMA limits for H1 vs H2 2025-26
21 PDs	14 bank-PDs + 7 SPDs
62.4% vs 70%	Average PD success ratio in H1 vs H2 2025-26
76.1% vs 74.8%	PD share of amount allotted in T-Bill auctions, 2025-26 vs 2024-25
76.3%	State market borrowings as share of financing gross fiscal deficit, not share of total debt
95.1%	State gross market borrowing as percentage of quarterly indicative-calendar amount
1,055 vs 217	Total State issuances vs re-issuances in 2025-26
CSF/GRF/BSF	CSF = 26 States + 2 UTs; GRF = 25 States + 1 UT; BSF = 2 States
BIS vs MTDS	BIS = issuance/tenor transparency strategy; MTDS = broader medium-term cost-risk debt strategy
₹735 crore vs ₹730 crore	Foreign Central Bank Scheme face-value transactions in 2025-26 vs 2024-25
T-Bill net issuance negative	(-)₹48,672 crore means net short-term T-Bill issuance was negative, not zero issuance

 

PART 7: LAST-MINUTE EXAM FACTS

·        IDMD manages Central Government domestic debt under Sections 20 and 21 of the RBI Act, 1934.

·        RBI manages debt of 28 State Governments and 3 UTs under Section 21A.

·        Section 17(5): short-term credit up to 3 months bridges temporary cash mismatches.

·        Three debt-management objectives: cost optimisation, risk mitigation and market development.

·        Central G-sec W.A. yield fell 27 bps in 2025-26.

·        Central outstanding debt W.A. coupon fell 8 bps.

·        Central 10-year yield hardened 49 bps.

·        Gross dated G-sec borrowing rose 4.3%, while net market borrowing fell 2.6%.

·        50.9% of Central market borrowing had residual maturity of 10 years and above.

·        No PD devolvement occurred in 2025-26.

·        Two all-bid rejection instances related to a notified ₹16,000 crore amount.

·        PDs numbered 21, comprising 14 bank-PDs and 7 SPDs.

·        PD success ratio: 62.4% in H1 and 70% in H2 2025-26.

·        PD T-Bill auction allotment share rose to 76.1%.

·        Central WMA limits: ₹1.5 lakh crore in H1 and ₹0.5 lakh crore in H2.

·        Central Government used WMA for only 1 day in 2025-26.

·        State SGS W.A. yield rose to 7.32%; spread rose to 50 bps.

·        27 States and 2 UTs issued non-10-year dated securities, with tenors of 2-38 years.

·        19 States/UTs used SDF, 11 used WMA and 10 entered overdraft on some occasions.

·        State gross borrowing was 95.1% of quarterly indicative-calendar amounts.

·        State issuances: 1,055, including 217 re-issuances.

·        State outstanding debt in Table VII.4: ₹73,03,451 crore at end-2025-26.

·        CSF covers 26 States + 2 UTs; GRF 25 States + 1 UT; BSF 2 States.

·        BIS pilot starts in 2026-27 for 9 States: AP, Bihar, Chhattisgarh, Kerala, MP, Maharashtra, Rajasthan, Telangana, UP.

·        Retail Direct T-Bill auto-bidding covers investment and re-investment.

·        Retail Direct API permits value-free own-account G-sec transfers between RDG and demat accounts.