RBI sets loan limits for govt

May 24 | Updated: May 25 2007, 11:09am hrs
Indias central bank has set the limit on loans to the federal government at Rs 20,000 crore ($4.93 billion) in the six months ending September 30. The amount the government can borrow from the central bank in the second half of the fiscal year ending March 31 will be Rs 6,000 crore, the Reserve Bank of India said in a faxed statement in Mumbai.

The central bank will charge the repurchase rate to the government for loans extended to the maximum limit in each of the six months. The repurchase rate, currently 7.75%, is also the rate at which the central bank lends funds to banks. Loans beyond the limit will be charged an additional 2%. The government, according to an agreement with the central bank signed in March 1997, will not be allowed to keep an overdraft for more than 10 days. If loans exceed 75% of the limit, the government sells bonds to repay the funds.