The government has raised Rs 5,000 crore from the money market, outside its scheduled borrowing programme for the first half of the current fiscal year, to take over the Reserve Bank's 59.73 per cent stake in State Bank of India (SBI) by the month-end.
"The government has raised additional money through bonds basically to finance the purchase of the central bank's stake in SBI," Finance Minister P Chidambaram told reporters on Tuesday.
In his Budget speech, the Finance Minister had announced that the government would take over the SBI stake from the RBI at an estimated market value of Rs 40,000 crore to separate the ownership and regulatory functions of the central bank.
Since the process has to be completed by June 30, the government has to arrange the money by that date.
Declining to specify whether the government would raise additional money through bonds, Chidambaram said, "We have to wait for the first instalment of advance tax collections, which is due on June 15."
The SBI stake transfer transaction, however, would be in the form of a book entry and would not entail any net outgo from the exchequer.
The government also proposes to buy the RBI's stake in the National Bank of Agriculture and Rural Development (NABARD) and the National Housing Bank (NHB).
Gilt yields rose to fresh 10-month highs on Tuesday as faster-than-expected factory output data sparked concerns the central bank may raise rates to head off inflationary pressures.
The yield on the new benchmark 10-year bond ended at 8.37 per cent, its highest since early August last year, compared with the previous close of 8.35 per cent.
Quarterly tax payments of about Rs 20,000 crore due this week and a Rs 6,000 crore bond auction on Friday are expected to drain cash from
the banking system, leaving traders with lesser surplus funds to buy debt.
The government auctioned Rs 5,000 crore of 2017 bonds on Tuesday. It had also auctioned Rs 5,000 crore of treasury bills on Monday, and would sell Rs 6,000 crore of bills at its regular auction on Wednesday.
After the market closed on Friday, the government said it would auction Rs 22,000 crore of bonds and bills this week, in a series of sales traders said were aimed at draining excess cash from the banking system.