Greenshoe option in G-Sec

The Government of India, in consultation with the Reserve Bank of India (RBI), has finalised its borrowing programme for the first half (H1) of the financial year 2026–27, outlining a calibrated strategy to manage fiscal needs and market stability.

As per the Budget Estimates (BE) for 2026–27, the government had planned gross market borrowings of ₹17.20 lakh crore. However, following the Budget presentation, switch operations of Government Securities (G-Secs) were undertaken, bringing down the total borrowing requirement to ₹16.09 lakh crore.

Out of this revised amount, the government plans to borrow ₹8.20 lakh crore (about 51%) during H1 through the issuance of dated securities. This includes ₹15,000 crore worth of Sovereign Green Bonds (SGrBs), reinforcing the government’s commitment to sustainable finance and green infrastructure.

To ensure smoother debt management, the government will continue switching and buyback operations of securities, aimed at managing the redemption profile and reducing refinancing risks.

A key feature of the borrowing programme is the continued use of the greenshoe option in G-Sec auctions. This provision allows the government to retain additional subscription of up to ₹2,000 crore per security beyond the notified amount.

The greenshoe option acts as an over-allotment mechanism, enabling authorities to accommodate excess demand and stabilize market yields. By allowing additional issuance when demand is strong, it helps prevent sharp price volatility, improves liquidity management, and ensures efficient borrowing without disrupting the market.