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Small savings, PF monies were 4 bps costlier than market loans

BS Banking Bureau in Mumbai

The Centre's fund raising through small savings and provident funds has been at rates higher than for its market borrowings.

The average cost of small savings and provident funds was at 11.36 per cent in 2001-02, while that for market loans was 4 basis points lower at 11.32 per cent.

According to the Reserve Bank of India, the effective cost to the government on account of small savings after taking into account tax exemptions is higher. It added that the major source for financing the Centre's fiscal deficit continues to be market borrowings.

Net market borrowings financed 69.4 per cent of the gross fiscal deficit as against 61.4 per cent in the previous fiscal and 17.9 per cent in 1990-91.

Compared with the budgeted level of 31.9 per cent, other liabilities - which include small savings, state provident funds and special deposits - financed only 26.1 per cent of the GFD. The balance GFD was financed by drawing down on cash balances and external assistance.

The RBI had taken a devolvement/ private placement of Rs 28,892 crore (Rs 288.92 billion) during the year 2001-02.

The weekly average utilisation of ways & means advances has declined over the year from Rs 10,391 crore (Rs 103.91 billion) in the first quarter to Rs 4,552 crore (Rs 45.52 billion) in the last quarter of 2001-02.

The average utilisation in 2001-02 was higher at Rs 7,138 crore (Rs 71.38 billion) as against Rs 4,881 crore (Rs 48.81 billion) in the previous year.

The outstanding WMA at the end of fiscal 2001-02 was at Rs 5,176 crore (Rs 51.76 billion) compared with Rs 5,395 crore (Rs 53.95 billion) at the end of the previous year.

The RBI has added that the slippages between budgeted estimates and actual outruns have increased the reliance on market borrowings due to the costs and other constraints on alternate sources of financing.

Relief bonds gain currency

Relief Bonds emerged as an important source of financing the fiscal deficit. Net receipts under Relief Bonds during 2001-02 was at Rs 4,500 crore 9 Rs 45 billion) and has been budgeted at Rs 6,500 crore (Rs 65 billion) for 2002-03.

The interest rates on Relief Bonds 2001, was reduced to 8.5 per cent from 9 per cent earlier, and further brought down to 8 per cent in the 2002-03 Budget.

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