The maximum maturity was gradually elongated from 20 years during 1998-99 to 30 years in 2002-03. Simultaneously, the weighted average maturity has increased substantially to 14.26 years in 2001-02 from 5.7 yeras in 1995-96.
On the other hand, the average cost of the issuance has come down from 13.75 per cent to 9.44 per cent over the same period. Further certain innovations were also brought into the instruments like floating rate bonds and allowing put/call options in the government securities.
The monetary management in the first half of 2002-03 was largely in conformity with the monetary policy stance announced in the annual Policy statement of April 2002.
Elaborating on debt management strategy, Dr Jalan explained that RBI continues to combine auction issuers with acceptance by private placement of dated securities consistent with market conditions. Because of the existing liquidityy conditions in the market and low inflation, the government has been to borrow at a substantialy lower cost during 2002-03.
The money impact of private placement, however was neutralised by conduct of outright OMO sales of government securities.
As spelt out in the policy statement, RBI has been able to maintain a stable interest rate regime throughout the first half of the year with a bias towards softening of interest rate.
Dr Jalan said that the softer interest rates prevailing in the economy in the recent period, is sustainable in the medium/long-term if the rate of inflation continues to be low. An objective of monetary fiscal and supply management policies must be to ensure that there is no resurgence of inflationary pressures in the economy.
Also, in an effort to provide further transparency and stability in the government securities market, a number of measures have been put in place by RBI during 2002-03 so far.
These measures, inter-alia include an announcement of a half yearly calender for government of India dated securities, holding of government securities by both wholesale and retail investors in dematerialised form, arranging NDS data almost on real-time basis to the RBI website for the market participants.
The central bank has also been making sustained efforts to increase the investor base of government securities market by encouraging retailing of government securities and making CSGL account holders eligible fo the repos market.