RBI Annual Report FY 2025-26 explains public debt management, G-sec borrowing, T-Bills, Retail Direct, state borrowings, PDs, CSF, GRF and debt strategy.
The RBI Annual Report FY 2025-26 provides a detailed account of how the Reserve Bank managed the domestic debt of the Central Government and state governments during a year marked by monetary easing, global financial volatility and geopolitical tensions. The focus was not merely on raising funds but on achieving three simultaneous objectives: cost optimisation, risk mitigation and market development. For RBI Grade B Promotion Exam, Grade B, UPSC, banking examinations and interviews, this chapter is particularly important because it connects government borrowing, fiscal policy, G-secs, monetary policy, liquidity, Primary Dealers and state finances.
1. What is Public Debt Management?
Public debt management essentially involves arranging government borrowing in a manner that ensures the government obtains funds while keeping borrowing costs and associated risks under control.
Within RBI, the Internal Debt Management Department (IDMD) is entrusted with domestic debt management responsibilities.
According to the Annual Report, IDMD manages:
- Domestic debt of the Central Government under Sections 20 and 21 of the RBI Act, 1934.
- Debt of 28 state governments.
- Debt of 3 Union Territories under Section 21A.
- Short-term credit of up to three months under Section 17(5) to bridge temporary mismatches in government cash flows.
Three core objectives of debt management
The RBI’s debt-management operations during 2025-26 were guided by:
- Cost optimisation
- Risk mitigation
- Market development
The Annual Report notes that the weighted average yield of Central Government dated securities softened by 27 basis points during the year. Issuance of Sovereign Green Bonds (SGrBs) and ultra-long securities also continued.
Exam Concept
Do not confuse public debt management with merely “borrowing money”.
A good debt-management framework attempts to balance:
Funding requirement → Cost → Maturity → Refinancing risk → Market development
2. RBI’s 2025-26 Agenda for Public Debt Management
The IDMD had two specific goals for 2025-26:
Goal 1: Expand Retail Direct facilities
The RBI wanted to expand bidding and payment options available to retail investors through the RBI Retail Direct portal/application.
Goal 2: Enable API-based G-sec transfers
The second objective was to extend an Application Programming Interface (API) facility for seamless transfer of government securities between:
Demat accounts ↔ Retail Direct Gilt (RDG) accounts
Both objectives were implemented during the year.
3. Retail Direct: Making Government Securities More Accessible
One of the most important developments was the enhancement of the Retail Direct ecosystem.
Auto-bidding facility for T-Bills
An auto-bidding facility for Treasury Bills (T-Bills) was enabled.
It covers:
- Investment options
- Re-investment options
This allows retail investors to mandate automatic placement of bids in primary T-Bill auctions.
Why is this important?
Traditionally, participation in government securities markets was more institutionally oriented.
Retail Direct reduces this barrier by allowing individuals to participate more easily in government securities.
Exam connection
Remember:
Retail Direct → retail participation in government securities
And for FY 2025-26 specifically:
Auto-bidding for T-Bills was enabled.
4. API Facility Between RDG and Demat Accounts
The RBI also enabled an API facility for value-free, own-account transfer of G-secs held by retail investors between:
- RDG accounts, and
- Demat accounts maintained with SEBI-regulated depositories, namely NSDL and CDSL.
This is essentially an interoperability improvement.
Exam Point
RDG = Retail Direct Gilt account
It is the account through which retail investors can hold government securities under the Retail Direct framework.
5. Central Government Borrowing in 2025-26
The Central Government’s gross market borrowing through dated securities increased, but net borrowing through dated securities declined.
Key numbers
| Indicator | FY 2024-25 | FY 2025-26 |
|---|---|---|
| Gross market borrowing through dated securities | ₹14.01 lakh crore | ₹14.61 lakh crore |
| Net market borrowing through dated securities | ₹10.82 lakh crore | ₹10.84 lakh crore |
| Net dated securities + T-Bills | — | ₹10.36 lakh crore approximately |
The Annual Report states that:
- Gross market borrowing through dated G-secs increased 4.3%.
- Net market borrowing through dated securities increased only marginally in absolute terms.
- Net market borrowing through dated securities and T-Bills together increased 0.2% during 2025-26.
The detailed table reports:
- Gross dated-security borrowing: ₹14,61,000 crore
- Net market borrowing: ₹10,84,162 crore
- Net borrowing through dated securities: ₹11,32,834 crore
- Net 91-day T-Bills: –₹52,936 crore
- Net 182-day T-Bills: ₹13,596 crore
- Net 364-day T-Bills: –₹9,333 crore.
Important distinction
Gross borrowing ≠ net borrowing.
Gross borrowing includes the total amount raised.
Net borrowing takes account of repayments/redemptions and other adjustments.
6. Weighted Average Yield and Coupon
The cost of government borrowing improved in an important respect.
The weighted average yield of G-secs issued during FY 2025-26 declined by 27 bps compared with the previous year.
The weighted average coupon on the entire outstanding debt stock declined by 8 bps.
Important figures
| Indicator | FY 2024-25 | FY 2025-26 |
|---|---|---|
| Weighted average yield of fresh G-sec issuance | 6.96% | 6.69% |
| Weighted average maturity of fresh issuance | 20.66 years | 18.88 years |
| Weighted average coupon of outstanding stock | 7.25% | 7.17% |
Exam Trap
Do not confuse:
- Yield of fresh issuance
- Coupon on outstanding stock
- Maturity of fresh issuance
They are three different concepts.
7. What Happened to the G-Sec Yield Curve?
The G-sec yield curve steepened during 2025-26.
This happened because short-term and long-term yields behaved differently.
Short-term yields softened because of:
- Monetary policy easing
- RBI liquidity injection measures
- Sovereign credit-rating upgrade by an international rating agency
Medium- and long-term yields hardened because of:
- Movement in sovereign yields in other countries
- Intensification of geopolitical risks
Consequently, the 10-year G-sec yield hardened by 49 bps during FY 2025-26.
Simple interpretation
Think of the curve as:
Short end ↓ + Long end ↑ = Steeper yield curve
This is an excellent conceptual question for an examination.
8. Maturity Pattern of Government Borrowing
Another important development was the maturity structure of Central Government borrowing.
About 50.9% of market borrowing during 2025-26 was raised through dated securities with a residual maturity of 10 years and above.
This was lower than 55.3% in the previous year.
FY 2025-26 maturity distribution
| Residual maturity | Amount raised | Share |
|---|---|---|
| Less than 5 years | ₹2.3 lakh crore | 16.0% |
| 5–9.99 years | ₹4.8 lakh crore | 33.1% |
| 10–14.99 years | ₹2.5 lakh crore | 17.4% |
| 15 years and above | ₹4.9 lakh crore | 33.5% |
| Total | ₹14.6 lakh crore | 100% |
Why does maturity matter?
Longer maturity can reduce immediate refinancing pressure, but it may involve higher long-term interest costs.
Therefore:
Debt management = balancing cost and refinancing risk.
9. Treasury Bills and Short-Term Government Borrowing
Treasury Bills are short-term government securities used primarily to meet short-term cash requirements.
During 2025-26, net short-term issuance of T-Bills was:
–₹48,672 crore
compared with:
–₹81,281 crore in 2024-25.
What does a negative net issuance indicate?
Broadly, it means that redemptions exceeded fresh net issuance over the period.
Remember
T-Bills → short-term government cash requirements
Dated G-secs → medium/long-term borrowing
10. Who Holds Government Securities?
Commercial banks remained the largest holders of G-secs, including:
- T-Bills
- State Government Securities
at end-March 2026.
Ownership structure
| Holder | Share at end-March 2026 |
|---|---|
| Commercial banks | 34.6% |
| Insurance companies | 24.0% |
| Provident funds | 10.9% |
| RBI | 10.9% |
| FPIs | 1.8% |
Exam Point
The largest holder category was:
Commercial banks – 34.6%
11. Primary Dealers: The Market-Making Backbone
There were 21 Primary Dealers (PDs) during FY 2025-26:
- 14 bank-PDs
- 7 standalone PDs
Their mandate includes:
- Underwriting primary auctions of dated G-secs.
- Meeting bidding commitments.
- Achieving specified success ratios in T-Bill and cash-management-bill auctions.
Key statistics
| Indicator | FY 2025-26 |
|---|---|
| Total PDs | 21 |
| Bank-PDs | 14 |
| Standalone PDs | 7 |
| Underwriting commission incl. GST | ₹86.3 crore |
| Success ratio H1 | 62.4% |
| Success ratio H2 | 70.0% |
| T-Bill allotment share to PDs | 76.1% |
Important development
There was no devolvement on Primary Dealers during 2025-26.
There were two instances where all bids were rejected for a notified amount of ₹16,000 crore.
12. Floating Rate Savings Bonds
Under the Floating Rate Savings Bond, 2020 (Taxable) scheme:
₹12,476 crore was raised during FY 2025-26.
Of this:
₹1,067 crore was raised through RBI Retail Direct.
This is another useful statistic for objective examinations.
13. Ways and Means Advances: Central Government
The Central Government’s Ways and Means Advances (WMA) limits were:
- H1 2025-26: ₹1.5 lakh crore
- H2 2025-26: ₹0.5 lakh crore
The government remained in surplus during most of the year.
As a result, it resorted to WMA for only one day, compared with eight days in the previous year.
Exam Concept
WMA is not normal long-term government borrowing.
It is a mechanism for dealing with temporary mismatches in government cash flows.
14. RBI’s Investment for Foreign Central Banks
The RBI also invests in Indian G-secs on behalf of select:
- Foreign central banks
- Multilateral development institutions
by participating in the secondary market.
The total volume transacted under this scheme increased marginally from:
₹730 crore → ₹735 crore
during FY 2025-26.
This is a relatively minor statistic, but it can become a factual MCQ.
15. State Government Borrowing
Public debt management does not stop with the Central Government.
RBI also manages the domestic debt of state governments and certain UTs.
An important development was the increased role of market borrowing in financing states’ fiscal deficits.
The share of market borrowings in financing the Gross Fiscal Deficit (GFD) of states increased to:
76.3% in 2025-26 (BE)
from:
71.8% in 2024-25 (RE).
State borrowing programme
During 2025-26:
- Gross state market borrowings were 95.1% of the amount indicated in quarterly indicative calendars.
- Total issuances: 1,055
- Re-issuances: 217.
16. State Government Securities: Yields and Spreads
The weighted average cut-off yield of State Government Securities (SGS) increased from:
7.20% → 7.32%
during FY 2025-26.
The weighted average spread over comparable Central Government securities increased from:
30 bps → 50 bps.
Maturity range
In FY 2025-26:
- 27 states and 2 UTs issued dated securities with tenors other than 10 years.
- Maturities ranged from 2 to 38 years.
- Average inter-state spread on fresh 10-year securities increased from 4 bps to 8 bps.
17. SDF, WMA and Overdraft for States
During 2025-26:
- 19 states/UTs availed Special Drawing Facility (SDF).
- 11 states/UTs resorted to WMA.
- 10 states/UTs were in overdraft on a few occasions.
Conceptual hierarchy
For exam purposes, broadly remember:
SDF → WMA → Overdraft
as mechanisms associated with management of temporary cash mismatches, with progressively greater stress implications when moving toward overdraft.
18. State Investments in Treasury Bills
States and UTs also invest their surplus cash balances.
As of March 31, 2026:
| Instrument | Investment |
|---|---|
| 14-day Intermediate Treasury Bills (ITBs) | ₹2,05,998 crore |
| Auction Treasury Bills (ATBs) | ₹63,409 crore |
| Total | ₹2,69,407 crore |
The increase in ITB holdings reflected surplus cash balances of states/UTs.
19. Consolidated Sinking Fund, Guarantee Redemption Fund and Budget Stabilisation Fund
RBI manages three important reserve funds on behalf of member states/UTs:
1. Consolidated Sinking Fund — CSF
Used as a mechanism associated with debt redemption.
2. Guarantee Redemption Fund — GRF
Provides a buffer relating to guarantees issued by state governments.
3. Budget Stabilisation Fund — BSF
Used by participating states for budget stabilisation purposes.
As of end-March 2026:
| Fund | Coverage | Outstanding investment |
|---|---|---|
| CSF | 26 states + 2 UTs | ₹2,66,224 crore |
| GRF | 25 states + 1 UT | ₹51,992 crore |
| BSF | 2 states | ₹23,193 crore |
Important comparison
CSF increased from ₹2,40,348 crore to ₹2,66,224 crore.
GRF increased sharply from ₹16,019 crore to ₹51,992 crore.
BSF increased from ₹20,890 crore to ₹23,193 crore.
20. Benchmark Issuance Strategy — BIS
One of the most important forward-looking initiatives for state debt management is the Benchmark Issuance Strategy (BIS).
The objective is to:
- Improve transparency.
- Give investors greater clarity.
- Create benchmark securities.
- Organise borrowing around specific benchmark tenor buckets.
- Follow a pre-announced calendar.
A pilot was decided for nine state governments starting from 2026-27.
Nine states
- Andhra Pradesh
- Bihar
- Chhattisgarh
- Kerala
- Madhya Pradesh
- Maharashtra
- Rajasthan
- Telangana
- Uttar Pradesh
Why BIS matters
Instead of fragmented issuance across many maturities, benchmark issuance can improve:
Liquidity → Price discovery → Transparency → Investor participation
21. Medium-Term Debt Management Strategy — MTDS
RBI has also been encouraging states to adopt a Medium-Term Debt Management Strategy (MTDS).
MTDS involves:
- Assessing the existing debt portfolio.
- Evaluating internal vs external debt.
- Evaluating short-term vs long-term debt.
- Studying debt-servicing profiles.
- Identifying vulnerabilities.
- Adjusting debt composition and instrument structures.
- Managing cost-risk trade-offs.
- Supporting fiscal sustainability.
One-line definition
MTDS = a structured medium-term approach to managing the government’s debt portfolio while balancing cost, risk and fiscal sustainability.
22. RBI’s Public Debt Management Agenda for 2026-27
The Annual Report identifies three strategic milestones for 2026-27.
1. Review non-competitive bidding schemes
A comprehensive review of existing schemes for non-competitive bidding in:
- G-secs
- T-Bills
- SGS
is proposed.
2. Retail Direct + Account Aggregator
RBI proposes onboarding Retail Direct holdings under the Account Aggregator framework.
3. Expand Benchmark Issuance Strategy
RBI will sensitise remaining states/UTs to adopt BIS, building on the nine-state pilot.
23. Why Public Debt Management Matters for Monetary Policy
This is where the chapter becomes especially important for RBI examinations.
Government securities sit at the intersection of:
Fiscal policy + Monetary policy + Financial markets + Banking system
Fiscal policy connection
Government borrowing finances fiscal deficits.
Monetary policy connection
G-sec yields influence the broader interest-rate environment.
Banking connection
Commercial banks are major holders of government securities.
Liquidity connection
RBI’s liquidity operations can affect short-term G-sec yields.
Financial-market connection
G-secs serve as benchmark instruments for pricing other financial assets.
Therefore, public debt management is not an isolated administrative function.
It directly interacts with the functioning of the financial system.
24. Cause → Development → Effect → Significance
Cause
The government needs to finance its fiscal deficit and manage existing debt.
Development
RBI manages borrowing through G-secs, T-Bills and other instruments while maintaining orderly market conditions.
Effect
The borrowing programme affects:
- G-sec yields
- Banking-system liquidity
- Interest rates
- Investor portfolios
- Government financing costs
Significance
Efficient debt management helps reconcile the government’s financing requirements with:
lower cost + manageable risk + deeper government securities markets.
The RBI reported that Central and state government borrowing programmes were completed successfully despite global financial volatility and geopolitical tensions.
25. Most Important Numbers to Memorise
| Topic | FY 2025-26 figure |
|---|---|
| Central gross dated G-sec borrowing | ₹14.61 lakh crore |
| Central net market borrowing | ₹10.84 lakh crore |
| Weighted average yield of fresh G-secs | 6.69% |
| Fall in weighted average G-sec yield | 27 bps |
| Weighted average coupon outstanding | 7.17% |
| Weighted average maturity of fresh issuance | 18.88 years |
| 10-year G-sec yield movement | +49 bps |
| Borrowing through 10Y+ residual maturity securities | 50.9% |
| Net T-Bill issuance | –₹48,672 crore |
| Commercial banks’ G-sec holding share | 34.6% |
| Insurance companies | 24.0% |
| PDs | 21 |
| T-Bill allotment share to PDs | 76.1% |
| FRSB 2020 (T) raised | ₹12,476 crore |
| GoI WMA H1 | ₹1.5 lakh crore |
| GoI WMA H2 | ₹0.5 lakh crore |
| Days of GoI WMA usage | 1 day |
| State market borrowing financing GFD | 76.3% |
| State gross borrowings vs calendar | 95.1% |
| State issuances | 1,055 |
| SGS weighted average yield | 7.32% |
| SGS spread over comparable G-sec | 50 bps |
| CSF | ₹2,66,224 crore |
| GRF | ₹51,992 crore |
| BSF | ₹23,193 crore |
| State ITB investment | ₹2,05,998 crore |
| State ATB investment | ₹63,409 crore |
| BIS pilot states | 9 |
26. High-Probability Exam Questions
Q1. Which department of RBI manages the domestic debt of the Central Government?
Answer: Internal Debt Management Department (IDMD).
Q2. Under which RBI Act sections is Central Government domestic debt management entrusted to RBI?
Answer: Sections 20 and 21.
Q3. Under which section does RBI provide short-term credit for temporary cash mismatches?
Answer: Section 17(5).
Q4. What were RBI’s three broad objectives of public debt management in FY 2025-26?
Answer:
Cost optimisation, risk mitigation and market development.
Q5. What was the weighted average yield of Central Government G-secs issued in FY 2025-26?
Answer: 6.69%.
Q6. By how much did the weighted average G-sec yield decline?
Answer: 27 bps.
Q7. What happened to the 10-year G-sec yield during FY 2025-26?
Answer: It hardened by 49 bps.
Q8. Who were the largest holders of G-secs?
Answer: Commercial banks, with 34.6%.
Q9. How many Primary Dealers were there?
Answer: 21 — 14 bank-PDs and 7 standalone PDs.
Q10. What was the GoI’s WMA usage during 2025-26?
Answer: One day.
Q11. What was the weighted average yield of SGS?
Answer: 7.32%.
Q12. What was the SGS spread over comparable Central Government securities?
Answer: 50 bps.
Q13. Which states participated in the BIS pilot?
Answer: Andhra Pradesh, Bihar, Chhattisgarh, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Uttar Pradesh.
Q14. What are the three reserve funds managed by RBI for states/UTs?
Answer: CSF, GRF and BSF.
27. One-Minute Revision Sheet
IDMD → Central + 28 States + 3 UTs
Objectives → Cost + Risk + Market Development
Gross G-sec borrowing → ₹14.61 lakh crore
Net market borrowing → ₹10.84 lakh crore
Fresh G-sec weighted average yield → 6.69%
Yield change → –27 bps
Outstanding coupon → 7.17%
Fresh maturity → 18.88 years
10-year yield → +49 bps
10Y+ borrowing share → 50.9%
Net T-Bill issuance → –₹48,672 crore
Largest G-sec holder → Commercial banks, 34.6%
PDs → 21 = 14 bank + 7 standalone
PD T-Bill share → 76.1%
FRSB raised → ₹12,476 crore
Retail Direct FRSB → ₹1,067 crore
GoI WMA → ₹1.5 lakh crore H1; ₹0.5 lakh crore H2
WMA usage → 1 day
States’ market borrowing/GFD → 76.3%
State issuances → 1,055
SGS yield → 7.32%
SGS spread → 50 bps
CSF → ₹2,66,224 crore
GRF → ₹51,992 crore
BSF → ₹23,193 crore
BIS pilot → 9 states
2026-27 focus → Non-competitive bidding + AA/Retail Direct + BIS
Key Takeaways
- IDMD manages domestic debt of the Central Government, 28 states and 3 UTs.
- Public debt management has three core objectives: cost optimisation, risk mitigation and market development.
- Central Government gross dated G-sec borrowing was ₹14.61 lakh crore in FY 2025-26.
- Weighted average yield of fresh G-sec issuance declined 27 bps to 6.69%.
- The G-sec yield curve steepened, with the 10-year yield hardening by 49 bps.
- 50.9% of market borrowing came through securities with residual maturity of 10 years or more.
- Commercial banks were the largest holders of G-secs at 34.6%.
- There were 21 Primary Dealers, comprising 14 bank-PDs and 7 standalone PDs.
- The Central Government used WMA for only one day during the year.
- State governments’ market borrowings financed 76.3% of their GFD in 2025-26 BE.
- SGS weighted average yield increased to 7.32%, while its spread over comparable Central G-secs increased to 50 bps.
- RBI manages CSF, GRF and BSF for participating states/UTs.
- The Benchmark Issuance Strategy was planned as a pilot for nine states from 2026-27.
- RBI’s 2026-27 debt-management agenda includes reviewing non-competitive bidding, integrating Retail Direct holdings with the Account Aggregator framework and expanding BIS adoption.
RBI Annual Report FY 2025-26 — Part 19: Final Exam Takeaway
The central lesson from the public debt management chapter is that government borrowing is not simply about raising the largest possible amount of money at the lowest possible rate. RBI’s approach combines cost, maturity, refinancing risk, market liquidity, investor participation and financial-market development.
For the RBI Grade B Promotion Exam, the highest-priority areas are:
IDMD functions → Sections 20, 21, 21A and 17(5) → three debt-management objectives → G-sec borrowing numbers → yield and maturity → yield-curve movement → T-Bills → G-sec ownership → Primary Dealers → WMA → state borrowing → SGS spread → CSF/GRF/BSF → BIS → MTDS.
These are the facts and concepts most worth revising immediately before the examination.
Part 19 complete.