Special Correspondent

There is ample liquidity in the system, says RBI Deputy Governor

NEW DELHI: The Central Government on Thursday scaled up its market borrowings programme to Rs. 2.99 lakh crore for the first half of the current fiscal in keeping with the need to raise additional resources for funding the increased expenditure proposed in the Union budget for 2009-10.

At this level, the government’s borrowings would be about 24 per cent more than the earlier estimate of Rs. 2.41 lakh crore for the first half of this fiscal.

The increased borrowings programme was finalised here at a meeting between the Reserve Bank of India (RBI) and Finance Ministry officials led by Finance Secretary Ashok Chawla. Accordingly, the issuance calendar for marketable dated securities, which was announced on March 26 this year, has been suitably modified covering the period from July 18 to September 30.

Briefing the media after consultations with Finance Ministry officials on the changed borrowing schedule, RBI Deputy Governor Shyamala Gopinath said: “We have already done and announced Rs. 1.89 lakh crore. So, the balance is Rs. 1.10 lakh crore which we are going to be doing up to September 30 in ten tranches.”

Allaying apprehensions over the funding market getting disrupted by the government’s borrowing plan, Ms. Gopinath said: “We would be managing this programme in a non-disruptive manner… There is ample liquidity in the system”.

Presenting the full budget for 2009-10, Finance Minister Pranab Mukherjee had raised the gross borrowing plan to Rs. 4.51 lakh crore and thereby pegged the fiscal deficit at 6.8 per cent of the GDP (gross domestic product) for the year.

Revised calendar

The revised issuance calendar shows that the sale of dated securities would be initially for Rs. 12,000 crore a week and this would later taper off during the last few weeks of September. As for the RBI’s open market operations (OMO) — a system through which the central bank sucks out or injects liquidity into the system against government papers — the programme is to continue as announced earlier.

The sale of government securities or bonds worth Rs. 12,000 crore is scheduled for July 17, as per an earlier announcement.

The new indicative calendar has scheduled ten auctions for bonds worth Rs. 1.10 lakh crore between July 18 and September 25. The first seven auctions during July 18 to September 4 have been slated for the sale of Rs. 12,000 crore bonds each week. In the last three weeks of September, however, the sale of securities are set to taper off to Rs. 11,000 crore, Rs. 7,000 crore and Rs. 8,000 crore, respectively.