Shaktikanta Das says RBI will "deal with" Centre's FY23 market borrowing programme

RBI Governor Shaktikanta Das (File image)

The Reserve Bank of India (RBI) will "deal with" the Centre's borrowing programme, Governor  Shaktikanta Das said on February 14.

"Internally, within the RBI, we are working on the borrowing target and it's too early for me to comment on the modalities of how we are going to deal with it. But we will deal with it," Das told reporters following the conclusion of the central bank's board meeting.

The recently-presented budget estimated the Centre would borrow Rs 14.95 lakh crore on a gross basis from the market in FY23, 42.9 percent higher than the revised estimate for FY22. This led to a huge jump in government bond yields as market participants feared the government's huge borrowing programme would push yields sharply higher, particularly in the absence of any buying support from the RBI, which is in the midst of unwinding its massive pandemic-related liquidity infusion.

Consequently, the first weekly bond auction held after the budget on February 4 saw the government being able to raise only Rs 10,525 crore as against the notified amount of Rs 24,000 crore. At the auction, the RBI rejected bids for two bonds.

In his post-policy media address on February 10, Das called on bond market participants to engage in a responsible manner so that all stakeholders could benefit.

Das told reporters today that the Cash and Debt Management Group will meet next month to decide the borrowing calendar for FY23.

Commenting on the budget announcement related to 'green bonds', which will be issued in FY23 within the government's  borrowing programme, Das said the main rationale was to widen the investor base.

"World over, there are a lot of investors who have dedicated funds to invest in Green Bonds. So when you float a Green Bond, you are widening the participation of international investors in the domestic bond market," the governor said.