The finance ministry is likely to ask the Reserve Bank of India (RBI) to issue a new set of bonds, instead of government securities, to partially mop up excess liquidity from the domestic market. | |
| According to finance ministry officials, funds raised through government borrowing have to be placed in the Consolidated Fund of India (CFI), which is immediately reflected in the fiscal deficit. |
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| The ministry's position is based on an analysis of the burgeoning foreign exchange reserves in the country and RBI's consequent proposal to set up a fund under the Public Accounts, which will receive the proceeds from the proposed market stabilisation bond. |
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| It would be easier for the finance ministry to issue bonds to operationalise the fund, a RBI spokesperson said. The ministry has, however, argued that it can issue bonds only for accrual to the CFI, and a change will need a constitutional amendment. |
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