State may opt for ₹10,000 cr. open market borrowings in second quarter

Government borrowed ₹12,500 cr. during the first quarter

With slow pace at which the economic activities are picking up post lockdown, the State government has decided to go for open market borrowings to the tune of ₹ 10,000 crore during the second quarter of the current financial year from July to September.

In view of the significant drop in the State’s own tax and non-tax revenues during the first quarter on account of coronavirus (COVID-19), the government borrowed ₹12,500 crore during the first quarter ending June 30 in different tranches.

The government has decided to borrow the proposed ₹10,000 crore in six tranches of varying amounts of ₹ 2,000 crore and ₹1,000 crore in each tranche during the current quarter.

Indicative calendar

According to the indicative calendar of market borrowings for the quarter released by the Reserve Bank of India, the government is expected to borrow ₹ 2,000 crore during the auction to be held on July 7 and this would be followed by raising another ₹1,000 crore on July 28.

An amount of ₹ 4,000 crore would be raised in two instalments of ₹ 2,000 crore in August (August 11 and 25) and another ₹ 3,000 crore – ₹ 2,000 crore and ₹1,000 crore during the auctions slated on September 8 and 29 respectively, the calendar said. The RBI said that the quantum of the market borrowings had been announced in consultation with the respective State governments and accordingly released the schedule with the names of the States that confirmed participation and the tentative amounts indicated by them.

The apex bank said the actual amount of borrowings would depend on the requirement of the State governments, the approval of the Central government under Article 293 (3) of the Constitution as well as the market conditions and other relevant factors.

It may be recalled that the Department of Expenditure of the Union Finance Ministry had fixed the ceiling of open market borrowings of the State at ₹15,051 crore for the first nine months of the current financial year, and the State had already borrowed ₹12,500 crore.

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