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Inertia to affect borrowing programme

Mumbai, Oct. 29: The Reserve Bank of India (RBI) today said the government’s budgeted borrowing programme may get affected by lower than anticipated real economic activity, shortfall in disinvestment proceeds and higher expenditure on account of drought relief.

However, RBI governor Bimal Jalan, while speaking to newspersons today, maintained that such a development is unlikely to impact interest rates.

In the mid-term review of monetary and credit policy for 2002-03, the central bank pointed out that gross fiscal deficit of the central government at Rs 55,496 crore (up to August), was lower by about 1 per cent over the corresponding period last year and constituted 41 per cent of the budget estimate of the current year. Similarly, the revenue deficit of Rs 45,525 crore accounted for 48 per cent of the budget estimate for the whole year.

The Union Budget for 2002-03 placed government’s net and gross market borrowings at Rs 95,859 crore and Rs 1,42,867 crore, respectively. It completed net borrowings of Rs 74,065 crore (77.3 per cent of the budgeted amount) and gross borrowings of Rs 1,10,032 crore (77 per cent) up to October 25.

The RBI governor disclosed that due to existing liquidity conditions and low inflation, the government has been able to borrow at substantially lower cost during this fiscal with the weighted average yield through dated securities at 7.52 per cent this year being significantly lower by 192 basis points than 9.44 per cent last year.

The central bank noted that as part of the debt management strategy, it continued to combine auction issues with acceptance by private placement of dated securities consistent with market conditions.

The total private placement of dated securities with the apex bank during the current year (up to October 25) was Rs 23,200 crore. “The monetary impact of private placement, however, was neutralised by conduct of outright OMO sales of government securities to the tune of Rs 27,000 crore (up to October 25).

The investment of scheduled commercial banks’ in government securities at Rs 66,700 crore up to October 4 has been much higher than Rs 43,400 crore in the corresponding period of the previous year.

Commercial banks already hold government and other approved securities much in excess of the prescribed statutory liquidity ratio (SLR) to the extent of Rs 1,66,200 crore, constituting 12.3 per cent of their net demand and time liabilities, RBI said.

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