Meeting higher govt borrowing a challenge:RBI

Mumbai: The government`s debt manager Reserve Bank has said that meeting the enhanced borrowing requirements for the next fiscal, announced in the Budget, will be an uphill task.

"It is going to be a challenge managing the enlarged borrowing programme…but certainly we will see how best we manage," deputy governor H R Khan, who oversees the government`s borrowing programme at the Mint Road, 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 trillion, while the net market borrowing will be Rs 4.70 trillion, up by Rs 43,000 crore.

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

The bond market also got nervous following the Budget announcement on more government borrowing. The yield on the benchmark 10-year bonds moved up by 9 bps 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 S L 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 told PTI.

"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 percent by the end of the month," IDBI Bank treasury head NS Venkatesh told PTI.`