More borrowings won’t pressure interest rates
The government would borrow additional money to the tune of Rs 45,000 crore from the Reserve Bank of India (RBI) to meet the shortfall in financing during the current fiscal.
By ET Bureau |
NEW DELHI: The government would borrow additional money to the tune of Rs 45,000 crore from the Reserve Bank of India (RBI) to meet the shortfall in financing during the current fiscal. It would use different windows available with itself to borrow this money, including possible conversion of market stabilisation scheme (MSS) bonds into regular government bonds.
However, it would not go for private placement with the central bank to avail of the borrowing facility, a senior government official said on Monday. The signal that the government wants to send out is that its borrowings would not pose additional pressures on interest rates.
���We are in consultation with RBI. We will notify the manner in which that (additional money) will be raised,��� economic affairs secretary Ashok Chawla said.
The government plans to borrow about Rs 306,000 crore in fiscal 2008-09 , including about Rs 45,000 crore additional borrowings. The government or RBI has, however, not announced any dates for the additional borrowing scheme.
Ruling out the possibility of market borrowing or private placement, Mr Chawla said the government was aware of the limitations of the market.
���We realise that there is the problem of how much the market can contribute and how much space should be available to others,��� he said. On private placement, he said, ���Private placement is not envisaged under the Fiscal Responsibility and Budget Management Act. We don���t wish to violate that.���
Yet another method through which the government proposes to raise borrowings without putting additional stress on the markets is by changing the memorandum of understanding with RBI on utilising bonds issued under MSS. Mr Chawla said the government is in talks with RBI to see how borrowings could be made outside the market, by converting intervention bonds into regular government bonds.
However, it would not go for private placement with the central bank to avail of the borrowing facility, a senior government official said on Monday. The signal that the government wants to send out is that its borrowings would not pose additional pressures on interest rates.
���We are in consultation with RBI. We will notify the manner in which that (additional money) will be raised,��� economic affairs secretary Ashok Chawla said.
The government plans to borrow about Rs 306,000 crore in fiscal 2008-09 , including about Rs 45,000 crore additional borrowings. The government or RBI has, however, not announced any dates for the additional borrowing scheme.
Ruling out the possibility of market borrowing or private placement, Mr Chawla said the government was aware of the limitations of the market.
���We realise that there is the problem of how much the market can contribute and how much space should be available to others,��� he said. On private placement, he said, ���Private placement is not envisaged under the Fiscal Responsibility and Budget Management Act. We don���t wish to violate that.���
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Yet another method through which the government proposes to raise borrowings without putting additional stress on the markets is by changing the memorandum of understanding with RBI on utilising bonds issued under MSS. Mr Chawla said the government is in talks with RBI to see how borrowings could be made outside the market, by converting intervention bonds into regular government bonds.
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