Mumbai: The government on Friday said it will borrow an additional Rs45,000 crore from the market to bridge its widening fiscal deficit.
The fresh round will take its annual borrowing to Rs1.9 trillion for fiscal 2009, against the original target of Rs1.45 trillion and its year-ago borrowing of Rs1.56 trillion.
The Reserve Bank of India (RBI) will auction bonds worth Rs10,000 crore in December, Rs20,000 crore in January and Rs15,000 crore in February.
The market was expecting Rs25,000 crore to Rs30,000 crore fresh borrowing. The higher amount will, however, not impact the market in a big way.
“The sequencing is beautiful. It is well calibrated and spread out, which won’t affect the market because by the time of the January borrowing, the advance tax collected in December will come back in the system and there won’t be any liquidity problem,” said Harihar Krishnamurthy, head of treasury at Development Credit Bank Ltd.
Besides, the government policy of unwinding its bonds issued under the market stabilization scheme (MSS) will take care of the liquidity that banks will require to subscribe to new bonds.
Had there been no MSS unwinding, the fresh borrowing would have soaked liquidity and banks would have been left with less money to lend.
The government had in September announced the buyback of MSS bonds matching the amount of the primary auction of bonds.