The Hindu : Market favourable for additional borrowing: RBI

Online edition of India's National Newspaper
Saturday, Jun 28, 2003

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Market favourable for additional borrowing: RBI

NEW DELHI JUNE 27. The Reserve Bank of India today indicated that favourable market conditions with soft interest rates and excess liquidity would enable the Government to borrow Rs. 7,000 crores more next month.

While maintaining the soft interest bias, the RBI Governor, Bimal Jalan, also ruled out a repo rate cut as of now.

"Market conditions are good. If Government needs more money, it can be raised,'' Dr. Jalan told reporters here.

The yield on 10-year government papers is at the lowest level, at about 5.75 per cent, while there is excess liquidity in the financial sector. Taking advantage of this situation, the RBI, on behalf of the Government, plans to raise Rs. 21,000 crores in the first three weeks of July as against the scheduled Rs. 14,000 crores.

The central bank plans to auction bonds worth Rs. 12,000 crores through three long-dated papers on July 1, as against the original schedule of Rs. 9,000 crores. Dr. Jalan termed this as an "anticipation'' that the Government required more funds than was laid down in the borrowing schedule.

The RBI Governor dismissed the additional borrowing as a measure to suck excess liquidity from the system, saying "it is not a liquidity drain.''

The Centre's gross borrowings stood at Rs. 50,001 crores till June 13 as against Rs. 55,001 crores in the same period last year, which was an indication of fiscal prudence. Gross borrowings, including the Rs. 7,000 crore mopped up under the Centre-State debt swap scheme, till the second week of this month was 30.1 per cent of Rs. 166,230 crores budgeted for the entire fiscal.

With redemptions at Rs. 13,288 crores till June 13, the net borrowings stood at Rs. 36,712 crores, which were down by about 15 per cent from Rs. 42,984 crores in the previous year period. Redemptions, however, rose by about 11 per cent from Rs. 12,017 crores in a year-ago period.

The net borrowings of the Government till the second week of June were 34.2 per cent of Rs. 107,194 crores budgeted for this fiscal. — PTI

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