W & M Advances Slide To Rs 9,411 Cr

The central governments recourse to ways and means advances (WMA) from the Reserve Bank of India (RBI) has declined to Rs 9,411 crore as on April 17, as against Rs 10,463 crore on April 10.

The governments recourse to WMA is expected to fall further in the coming weeks. This is because the government had privately placed Rs 5,000 crore with the RBI on April 24, to part-extinguish its recourse to WMA. In addition, the government has raised Rs 4,000 crore by auctioning a 10-year paper on April 30.

Thus, the government has raised Rs 17,000 crore by issuing dated securities in the month of April.

As on April 10, the stock of rupee securities with the Reserve Bank was Rs 1,19, 085 crore. On a year on year on basis the increase in the stock of rupee securities with the central bank has been Rs 5,915 crore. The stock of securities with RBI is slated to go up on account of the private placement. It is also expected that, during the course of the year, net RBI credit to the government will go up.

The ultimate level of net RBI credit to the Central government will depend on the size of the fiscal deficit which is projected at 6 per cent of GDP as per current trends

In the credit policy, the RBI has drawn attention to the fact that efforts would be needed to prune the fiscal deficit to a reasonable level in order to contain the borrowing programme of the government.

The apex banks stance is that, If the projected increase in the market borrowing programme is too high, there could be pressure on interest rates, which in turn could affect the expected rate of inflation and investment in the economy.

During the fiscal 1998-99, the stock of treasury bills with the apex bank has gone up by Rs 139 crore. In the last fiscal only the 91-day treasury bills could devolve on RBI but ever since the practice of notifying the amounts at the auction of 14-day and 364-day bills was introduced, there would be a devolvement unless the issue is adequately underwritten by the primary dealers and satellite dealers.

Given that, on the one hand, the RBI has been raising only Rs 100 crore at the auction of treasury bills while there have been redemption of over Rs 2,000 crore of 364-day treasury bills, the stock of treasury bills in the market has declined.

As on April 17, the RBI held Rs 766 crore worth of treasury bills, banks held Rs 12,394 crore, state governments held Rs 4,595 crore while others held Rs 3,040 crore.

The total quantum of 14-day, 91-day and 364-day treasury bills outstanding on April 17 were Rs 200 crore, Rs 1850 crore and Rs 14,339 crore respectively. The quantum of 364-day treasury bills outstanding will decline further given that there was a redemption on April 24.