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    H1 borrowing programme in line with expectations: Praveen Kumar Gupta, SBI

    Synopsis

    They had borrowed 2 lakh 40 thousand crore in the same period last year, which is more or less in line with what they have been doing.

    ET Now
    In an interview with ET Now, Praveen Kumar Gupta, DMD and CFO, SBI, shares his views on the government’s borrowing programme. Excerpts:

    ET Now: Are H1 gross borrowing numbers in line with what your estimates were?

    Praveen Kumar Gupta: No, this is more or less broadly in line with what the government has been doing. For the last many years, typically the borrowing programme gets a little bit more frontloaded in the first six months. So they are borrowing net 2 lakh 25 thousand crore in the first six months and as you know, they had borrowed 2 lakh 40 thousand crore in the same period last year, which is more or less in line with what they have been doing.

    ET Now: Is there enough demand from bankers to absorb government borrowing though?

    Praveen Kumar Gupta: As of now the way they have announced this whole programme, this is more or less what the banks have been expecting and the banks have been subscribing to this. There is enough demand for some kind of amount to go through in the market and it is not just the banks. There are a lot of other subscribers besides banks who subscribe to this borrowing programme. LIC, insurance companies, pension funds and mutual funds subscribe to this.

    ET Now: The fact that the government is frontloading the borrowing programme, H1 will be stronger than the entire full year, it is a clear message that the government believes that in the short term the credit demand will not pick up and indirectly that is a bad signal?

    Praveen Kumar Gupta: No it is not exactly like that. Traditionally in India, the first six months are always a little slow as far as the credit pickup is concerned. That is why there is more of an opportunity to complete as much of their borrowing programme as they can in the first six months. Moreover, they have a lot of maturities which happen during the first six months. So this has traditionally been the case every year. I do not think this year is any different from what has been happening in the past.

    ET Now: But the timing is different because what has happened in the last two or three years was more like an economic crunch. Right now we are expecting a full-blown recovery and if you are expecting a full-blown recovery and if government borrowing programme is strong or high, that obviously will have impact on yields in the short term and perhaps liquidity in the short term.

    Praveen Kumar Gupta: Not exactly. There is enough liquidity as of now. The credit pickup is still slow. The government has taken a lot of initiatives to revive the credit demand, but all these initiatives will take a little bit of more time to get translated into the real credit demand from the banks. As the market has already reacted to it, the markets have been positive.

    ET Now: Do you think CRR cut could be expected in the April policy?

    Praveen Kumar Gupta: It could be. In the past the Reserve Bank has been very proactive. So they have been taking a lot of efforts to reduce SLR and CRR. CRR cut will definitely be helpful for the banks to pass on the rate cuts also to the customers. So let us wait and see what happens.

    ET Now: Do you think it could come this month itself?

    Praveen Kumar Gupta: Not really. Your guess is as good as mine. However, there are people in the market who do expect something to happen on that front.

    ET Now: But what do you think is the impact of the government borrowing on the 10-year yield and how do you see the bond yields shape up over the say next one to three months?

    Praveen Kumar Gupta: I do not think that the government yields should react much to this borrowing programme. The yields have already moved lower. So from here the scope for the yields to move substantially lower is not really there. The yields should stabilise somewhere closer to this level. The maximum they can go is about 7.5%. A lot will also depend on what happens to the small savings rates because the banks have already cut their rates.

    So, from this level the yields will not move lower, but the more important thing is borrowing programme, which should go through without much of a problem.
    The Economic Times

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