The State government has decided to mobilise ₹2,000 crore open market borrowing on April 21 through the auction of the government securities to meet its immediate requirements as it is faced with fund crunch due to the ongoing nationwide lockdown.
The government proposed to raise ₹1,000 crore through auction of securities with a tenure of six years and another ₹1,000 crore with tenure of eight years as part of the proceedings. A proposal to this effect has been submitted to the RBI which, in turn, announced that competitive and non-competitive bids for the auction should be submitted in electronic format on its Core Banking Solution (E-Kuber) on Tuesday.
Interestingly, the government had submitted an indicative calendar to the RBI for raising ₹9,000 crore during the first quarter of the current financial year in March and ₹2,000 crore had already been raised few days ago as part of the schedule. The borrowing forms part of the indicative calendar submitted to the RBI through which the government planned to raise ₹2,000 crore on April 13, ₹1,000 crore on April 28, ₹2,000 crore on May 12, ₹1,000 crore on May 26, ₹2,000 crore on June 9 and another ₹1,000 crore on June 30.
The Department of Expenditure (DoE) of the Union Finance Ministry had fixed the net borrowing ceiling of the State government for the first nine months of the current fiscal at ₹15,051 crore. “The borrowing by the State government is applicable for the first nine months of 2020-21 and as per the government’s advance indicative calendar submitted to the RBI,” the DoE said in its letter last month.
There is, however, no indication on whether the proposed market borrowing is over and above the indicative calendar submitted by the government or whether the State had advanced the dates for raising the amount in the RBI release. The RBI said that the actual amount of borrowings would depend on the requirement of the State governments, approval from the Central government under Article 293 (3) of the Constitution and the market conditions.
The Apex Bank would conduct the auctions in a non-disruptive manner taking into account the market conditions and other relevant factors and distribute the borrowings throughout the quarter. The RBI said it reserved the right to modify the dates and amount of auction in consultation with the respective State governments.