Govt to borrow Rs 4.88 trn, 62.56% of gross target in April-Sept period

The Center will borrow 4.88 trillion rupees, or 62.56% of the 2020-2021 gross borrowing target of 7.8 trillion rupees in April-September, the government and the Reserve Bank of India announced on Tuesday. . In FY20, the Ministry of Finance issued bonds representing 62.25% of its annual target of 7.1 trillion rupees.

Contrary to the expectations of many market players, the Center did not increase its borrowing plans for the year starting April 1, relying rather on a frontloading of emissions in g-sec at about the same level as ” in the first semester 2019-2020.

When asked if there were plans to increase borrowing to help finance new Covid-19 stimulus packages, Economic Secretary Atanu Chakraborty said the borrowing program had taken into account all the possibilities of a new revival.

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“The government is committed to meeting its needs for Covid-19 and to fighting Covid-19, whether because of health care commitments or to protect the economy, and also by providing the necessary incentives anytime. The borrowing program was designed this way, ”said Chakraborty.

The Center will, however, increase its weekly borrowing. The size of the g-sec tranches for April-September will be Rs 19,000-21,000 crore, compared to an average weekly borrowing of Rs 17,000 crore in 2019-20.

“The loan could indicate that the government has yet to find the final economic impact of a Covid package. The expectation in the market is that if there are additional borrowing due to the budgetary pressure led by Covid which can be financed directly via the RBI. Otherwise, the market is capable of managing loans of Rs 20,000 crore every week, “said Jayesh Mehta, director of treasury at Bank of America.

The RBI also increased advances for the center to 1.2 trillion rupees for the first half, from 75,000 crore rupees in the first half of last year, and 35,000 crore rupees for the second half of 2019-2020 initially ad.

The increase in ways and means advances allows the government to borrow more temporary money from the RBI. “The Reserve Bank can trigger a new flotation of loans in the market when the Indian government uses 75% of the WMA limit,” said the RBI.

A review of the borrowing schedule showed that of the 4.888 trillion rupees to be issued, about 3.06 trillion, or almost 63%, will be eligible for borrowing under the “ fully accessible route ” notified on Monday by the RBI.

READ ALSO: The budget deficit from April to February affects 135.2% of the revised estimates

The RBI had declared that maturities of 5 years, 10 years and 30 years would fall under this route and would be eligible for investment in the route fully accessible to non-resident investors. In other words, there will be no REIT limits on these issues. These securities will continue to be eligible for investment by residents.

This is the first step towards listing Indian g-secs in the global bond indexes, as the center seeks to attract excess cheap liquidity to foreign bond markets, following an announcement about it. by the Minister of Finance Nirmala Sitharaman in his 2020-2021 Union budget. The portion of these 3,066 billion rupees that will be effectively recovered by the REITs will depend on the appetite of the REITs and domestic investors.

“With so much liquidity in the banking system coupled with an attractive spread of almost 2% on Repo, G-sec will find its investors. In addition, the relative attractiveness of Indian bonds has also improved, followed by liquidity without precedent injected by major central banks around the world. “said Soumyajit Niyogi, Associate Director, India Ratings and Research.

At the press conference on the borrowing schedule, Chakrabory was also asked whether the revised budget deficit target of 3.8% of GDP would be reached. It was the day when data on the budget deficit from April to February indicated that the center will have to generate revenues of more than 5,000 billion rupees in March and may have to opt for substantial spending cuts.

He indicated that there will be no fiscal slippage. “A very realistic estimate had been made of the revenues, as well as the proposed expenses. Supplements were also provided and, for this reason, the abstention of 0.5% was taken from the budget. Therefore, for 2019-2020, the issue of the budget deficit is not much at stake, ”said Chakraborty.

Chakraborty also said that as of now, the change and buyout plan for 2020-2021 is around 2.7 trillion rupees. Asked about market rumors that the center could sell tickets directly to RBI and take money from them, he said there was no such plan.

“The government would do whatever is necessary to meet health and containment requirements and other similar restrictive measures. The government will do whatever is necessary to meet the needs of the poor and vulnerable sections. the government must do everything it has to do for the resurgence and recovery of industries, ”he reiterated.


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