Modalities for FY09 extra borrowings in a week

The Reserve Bank of India will work out the modalities of the government’s extra borrowing for current financial year in the next one week, a finance ministry official said today.

On Monday, the government announced in the Interim Budget that it will borrow an extra Rs 45,000 crore this year, but ruled out tapping the bond market or private placement. “We are in talks with RBI... It will find ways how to raise this money. We hope the modalities will be worked out in the next one week,” the official said. “We decided not to tap the market since there is a limit to which it can take the (bond) supply. We do not want yields to move up,” the official said.

The government and RBI also plan to formulate a strategy to ensure that the huge borrowing plan for 2009-10 (April-March) is done in a smooth manner. “We plan to announce borrowing calendar for first half of 2009-10 by March-end,” the official said.

For 2009-10, the Budget has pegged government’s gross borrowing at Rs 3.62 lakh crore and net borrowing at Rs 3.08 lakh crore. For 2008-09, the government’s gross borrowing is now pegged at Rs 3.06 lakh crore and net borrowing is seen at Rs 2.61 lakh crore.

The government has already borrowed Rs 2.15 lakh crore and will raise another Rs 91,000 crore between now and March. Of this, it will borrow Rs 46,000 crore from the market for which a calendar has already been announced.

Meanwhile, the government today said it would sell Rs 12,000 crore worth of bonds through price-based auction on February 24, 2009.

The g-secs will be issued under three different tenures. The first amounting to Rs 7,000 crore will carry an interest rate of 7.46 per cent and will mature in 2017.

The second tranche is for Rs 3,000 crore issued at an interest rate of 8.35 per cent and will have tenure of 13 years. The last one for Rs 2,000 crore has the longest maturity period of 25 years and will carry an interest rate of 7.5 per cent.