Meeting higher govt borrowing a challenge: RBI

The Reserve Bank of India (RBI) has said it is a tall order to manage government's enhanced borrowing next fiscal but it will do its best.

"It is going to be a challenge managing the enlarged borrowing programme ...But certainly we will see how best we manage," Deputy Governor HR Khan, who oversees the government's borrowing programme at the central bank, said.

According to Khan, there is a Rs 60,000-crore increase in the gross borrowing programme of the government in the next fiscal at Rs 5.69 lakh crore, while the net market borrowing will be Rs 4.70 lakh crore, up by Rs 43,000 crore.

The government badly missed both its fiscal deficit target of 4.6% as well as its targeted borrowing programme of Rs 4.17 lakh crore this fiscal, as it ended up borrowing as much as Rs 92,000 crore extra, pushing up the fiscal deficit number to 5.9% of the GDP.

The bond market got nervous following the Budget announcement on more government borrowing. The yield on the benchmark 10-year bonds moved up by 0.09 percentage point at close on Friday.

Even bankers have been critical of the higher government borrowing saying it will impact their overall margins.

Oriental Bank of Commerce Chairman and Managing Director SL Bansal said the Budget is not good for banks as the proposal to borrow more from the markets has already pushed up the bond yields.

"Look at how the yield has moved post-Budget. The market is not liking it and if the yields move up, its not good for a bank," Bansal said.

"There is a little bit of pressure on the bond market due to additional borrowing plan of the government. The 10-year benchmark G-Sec is likely to touch 8.50% by the end of the month," IDBI Bank Treasury Head NS Venkatesh said.