RBI locks in 100% subscription for ₹28,000 crore G-sec auction via ACU underwriting; long-dated bonds fully covered ahead of sale
ADVERTISEMENT
The Reserve Bank of India (RBI) has effectively ensured full subscription for the government’s ₹28,000 crore bond issuance by completing an Additional Competitive Underwriting (ACU) process and fixing commissions for Primary Dealers (PDs), guaranteeing that the entire notified borrowing will be absorbed even if investor demand falls short at the auction scheduled for June 25, 2026.
According to the RBI’s official release, the underwriting covers two long-term government securities: ₹17,000 crore of the 6.68% Government Security (GS) maturing in 2040 and ₹11,000 crore of the 7.43% GS maturing in 2076.
The central bank noted, “The underwriting auction will be conducted through multiple price-based method on June 25, 2026 (Thursday),” with PDs submitting bids via the RBI’s e-Kuber system.
Long-dated borrowing fully backstopped
The underwriting framework mandated a Minimum Underwriting Commitment (MUC) from Primary Dealers before inviting competitive bids for additional coverage. As per the RBI, PD-wise MUC stood at ₹405 crore for the 2040 paper and ₹262 crore for the 2076 security, ensuring a baseline absorption of the issuance.
The central bank added that “PDs may submit their bids for ACU auction electronically through Reserve Bank of India Core Banking Solution (e-Kuber system) between 09:00 A.M. and 09:30 A.M. on the day of underwriting auction.”
ACU bidding reflects demand comfort in gilts
Beyond the mandatory commitment, RBI allocated additional underwriting through ACU, effectively ensuring full coverage of both securities. The move underscores the role of Primary Dealers in stabilising sovereign borrowing, particularly in long-duration papers where demand risk tends to be higher.
Market participants typically view ACU participation as a barometer of risk appetite. In this case, the relatively low underwriting commissions indicate that PDs are comfortable absorbing inventory risk ahead of the sale, even at the long end of the yield curve.
Risk backstop ensures smooth government borrowing
The RBI further clarified that “the underwriting commission will be credited to the current account of the respective PDs with RBI on the day of issue of securities.” With total underwritten amounts matching the notified borrowing, the auction is effectively insulated from devolvement risk.
Underwriting mechanisms such as MUC and ACU form a structural safeguard in India’s gilt market, ensuring that government borrowing programmes proceed smoothly even in volatile demand conditions, while Primary Dealers act as the first line of absorption for sovereign debt supply.