Source: Times Of India
In the first indication of the government's budget calculations going awry, the finance ministry on Thursday said it will borrow nearly Rs 53,000 crore more than the budgeted level, a move which will further restrict fund-raising by the private sector.
Banks bore the immediate impact of the 32% jump in second half borrowings as the yield on 10-year government security climbed 10 basis points - the most in two months - to 8.44%. A rise in yield means that the value of the securities has declined and the banks will have to devalue the bonds in line with the market price at the end of the second quarter. With bond markets shut for trading on Friday , banks will have to factor in the 52 basis point increase in yields this quarter.
Some of the smaller public sector banks said they will take aRs 70-80 crore hit following the government announcement, which in case of larger players such as State Bank of India andICICI Bank could be much more. Government borrowing was increased while finalizing the calendar for the second half. The Centre will now borrow Rs 2.2 lakh crore between October and March compared to the original plan of Rs 1.67 lakh crore.
"Keeping in view the shortfall in other financing items, it has been decided to increase the government market borrowings through dated securities provided in the Union Budget 2011-12 by Rs 52,872 crore," the finance ministry said in a statement after a meeting between its officials and those of the RBI. For the full fiscal, government borrowings will rise to around Rs 4.7 lakh crore, from Rs 4.17 lakh crore budgeted earlier, of which Rs 2.5 lakh crore has been raised between April and September . Economic affairs secretary R Gopalan said that lowerthan-expected collections under small savings schemes such as public provident fund and post office deposits and lower cash surplus has forced the government to issue more bonds and increase borrowings .
In the first indication of the government's budget calculations going awry, the finance ministry on Thursday said it will borrow nearly Rs 53,000 crore more than the budgeted level, a move which will further restrict fund-raising by the private sector.
Banks bore the immediate impact of the 32% jump in second half borrowings as the yield on 10-year government security climbed 10 basis points - the most in two months - to 8.44%. A rise in yield means that the value of the securities has declined and the banks will have to devalue the bonds in line with the market price at the end of the second quarter. With bond markets shut for trading on Friday , banks will have to factor in the 52 basis point increase in yields this quarter.
Some of the smaller public sector banks said they will take aRs 70-80 crore hit following the government announcement, which in case of larger players such as State Bank of India andICICI Bank could be much more. Government borrowing was increased while finalizing the calendar for the second half. The Centre will now borrow Rs 2.2 lakh crore between October and March compared to the original plan of Rs 1.67 lakh crore.
"Keeping in view the shortfall in other financing items, it has been decided to increase the government market borrowings through dated securities provided in the Union Budget 2011-12 by Rs 52,872 crore," the finance ministry said in a statement after a meeting between its officials and those of the RBI. For the full fiscal, government borrowings will rise to around Rs 4.7 lakh crore, from Rs 4.17 lakh crore budgeted earlier, of which Rs 2.5 lakh crore has been raised between April and September . Economic affairs secretary R Gopalan said that lowerthan-expected collections under small savings schemes such as public provident fund and post office deposits and lower cash surplus has forced the government to issue more bonds and increase borrowings .
