SBI has said that RBI will need innovative steps to save the government’s borrowing scheme from Ukrainian influence
Mumbai:
A State Bank of India (SBI) report said the current Russo-Ukraine war may hamper the government’s lending program in the next financial year as the markets are feeling the shocks of growth.
Written by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, the report said that the Reserve Bank of India (RBI) may mitigate the economic impact of the ongoing conflict over the lending scheme by taking some innovative measures.
Following the ongoing devastation in the market in the wake of the war, the government clarified that borrowing is unlikely in March as crude prices are pushing down US yields, leading to an increase in domestic yields. Huge interest expense on the outstanding loan of about Rs 81 lakh crore of the government.
Simultaneously, the RBI has unconventional tools to manage government borrowing of over Rs 14.3 lakh crore in 2022-23 and it is important that the credit market understands such micro-ventures and does not go into the frenzy as it is currently. roaming in. Mr Ghosh said in the report that crude oil prices are threatening to move beyond $120.
According to him, RBI can go ahead with the proposed lending by taking advantage of all possible options within the framework through a ‘dumb’ strategy, also known as ‘barbell’ investment strategy. This involves purchasing a combination of bonds with shorter and longer maturities to offer the flexibility of short-term bonds in addition to the higher yields typically associated with longer-term bonds.
Mr. Ghosh called for a series of steps including holding the auction of government securities (G-Secs) twice a week instead of the current practice of weekly auctions, forward-loading it more or less evenly over four quarters and short-term mixing. suggested. Treasury-bills (T-bills) with medium- and long-term issuances and the government on its part are promoting small, savings.
RBI has to account for a higher share of T-bills in the borrowing spreadsheet across all three-time periods by removing the significant excess amount under the T-bill route in all weekly auctions with a band of Rs 1,500-2,500. Must find out. SBI Economic Advisor suggested that keeping in view the market appetite and liquidity position, Rs.
The government can promote small savings schemes. Notably, it may give a tough push to Sukanya Samriddhi Yojana (SSY) by encouraging new registrations in mission mode, allowing one-time registration for all remaining cases up to 12 years.
RBI can issue papers by matching the redemption profiles of government papers. According to the report, ideally, up to 7 years in the short term segment, 10-15 years in the mid-segment and up to 15 years in the long term segment can be the ideal mix to satisfy the borrowing appetite of the paper market players. Huh.