Govt plans to borrow Rs 7.5 lakh crore from market via bonds in first half of FY25

The Centre plans to raise Rs 7.5 lakh crore through market borrowing in the April-September period of 2024-25 to fund the revenue gap, the Finance Ministry said on Wednesday.

Out of the gross market borrowing of Rs 14.13 lakh crore estimated for 2024-25, Rs 7.5 lakh crore, or 53 per cent, is planned to be borrowed in the first half, an official statement said.

The fundraise would be done through dated securities, including Rs 12,000 crore through issuance of sovereign green bonds (SGBs). Based on market feedback and in line with global market practices, it has been decided to introduce a new dated security of 15-year tenor, it said.

"The gross market borrowing of Rs 7.5 lakh crore shall be completed through 26 weekly auctions," it said. The market borrowing will be spread over three, five, seven, 10, 15, 30, 40, and 50-year securities, it said.

The share of borrowing (including SGBs) under different maturities will be: 3-year (4.8 per cent), 5-year (9.60 per cent), 7-year (8.8 per cent), 10-year (25.6 per cent), 15-year (13.87 per cent), 30-year (8.93 per cent), 40-year (19.47 per cent) and 50-year (8.93 per cent), it said.

Finance Minister Nirmala Sitharaman in the interim Budget proposed to borrow Rs 14.13 lakh crore by issuing dated securities to meet revenue shortfall in the next financial year, starting April 1.

This is lower than last year's gross borrowing estimate of Rs 15.43 lakh crore, which was the highest ever. The fiscal deficit for 2024-25 is estimated at 5.1 per cent of the gross domestic product (GDP) against 5.8 per cent in the current financial year.

To meet the fiscal deficit, the gap between revenue receipt and expenditure, the government raises funds by issuing bonds in the market. "The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs 14.13 lakh crore and Rs 11.75 lakh crore, respectively.

"Both will be less than that in 2023-24. Now that private investments are happening at scale, the lower borrowings by the central government will facilitate larger availability of credit for the private sector," she had said.

The finance ministry statement further said that the government will continue to carry out switching of securities to smoothen the redemption profile.

The government will continue to reserve the right to exercise the greenshoe option to retain an additional subscription of up to Rs 2,000 crore against each of the securities indicated in the auction notifications, it said.

Weekly borrowing through the issuance of Treasury Bills in the first quarter of FY25 is expected to be Rs 27,000 crore for the first seven auctions and Rs 22,000 crore for the subsequent six auctions, it said.

There will be a weekly issuance of Rs 12,000 crore under 91-day T-Bills, Rs 7,000 crore under 182-day T-Bills, and Rs 8,000 crore under 364-day T-Bills in the first seven auctions.

Further, there will be weekly issuance of Rs 10,000 crore under 91-day T-Bills, Rs 5,000 crore under 182-day T-Bills, and Rs 7,000 crore under 364-day T-Bills in subsequent six auctions to be conducted during the quarter.

To take care of temporary mismatches in government accounts, it said, the Reserve Bank of India (RBI) has fixed the Ways and Mean Advances limit for the first six months of FY25 at Rs 1.5 lakh crore.

Like in the past, the central government, in consultation with the RBI, will continue to have the flexibility to bring about modifications in the calendar in terms of the notified amount, issuance period, maturities, etc, and to issue different types of instruments, including instruments having non-standard maturity, floating rate bonds (FRBs), inflation indexed bonds (IIBs), depending on the requirement of the Government of India, evolving market conditions and other relevant factors, after giving due notice to the market.

The calendar is subject to change, if circumstances so warrant, including for reasons such as intervening holidays.