Jalan: No Repo Rate Cut

New Delhi, June 27: | Updated: Jun 28 2003, 05:30am hrs
The Reserve Bank has expressed the hope that favourable market conditions with soft interest rates and excess liquidity will enable the government to borrow Rs 7,000 crore more next month.

While maintaining the soft interest bias will continue, Governor Bimal Jalan ruled out a repo rate cut as of now. Market conditions are good. If the government needs more money, it can be raised, he told reporters on here Friday. Dr Jalan earlier met finance minister Jaswant Singh. The yield on 10-year government papers are at the lowest level, at about 5.75 per cent, while there is excess liquidity in the financial sector.

Taking advantage of this situation, RBI on behalf of the government plans to raise Rs 21,000 crore during the first three weeks of July as against the scheduled Rs 14,000 crore. The central bank plans to auction bonds worth Rs 12,000 crore through three long-dated papers on July 1, as against the original schedule of Rs 9,000 crore. Dr Jalan termed this as an anticipation that the government requires more funds than was laid down in the borrowing schedule. The Governor dismissed the additional borrowing as a measure to suck excess liquidity from the system, saying it is not a liquidity drain.

The Centres gross borrowings stood at Rs 50,001 crore till June 13, as against Rs 55,001 crore during the same period last year, which was an indication of fiscal prudence.

Gross borrowings, including the Rs 7,000 crore mopped up under the Centre-state debt swap scheme, till the second week of this month was 30.1 per cent of Rs 1,66,230 crore budgeted for the entire fiscal.