Ministry of Finance, RBI meeting on Tuesday to decide on credit plans for the first half of fiscal 2020-21

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File photo of Finance Minister Nirmala Sitharaman.

File photo of Finance Minister Nirmala Sitharaman.

The meeting between the Ministry of Finance and the Reserve Bank of India (RBI) will be videoconferenced for the first time as there are bans across the country.

  • PTI New Delhi
  • Last updated: March 29, 2020, 9:38 p.m. IST

The Treasury and RBI will hold a meeting on Tuesday to decide on the government’s loan plan for the first half of 2020-21 to curb the spread of the coronavirus.

According to sources, the government would pre-charge its credit plan to meet the challenges that COVID-19 poses to the economy.

The meeting between the Ministry of Finance and the Reserve Bank of India (RBI) will be videoconferenced for the first time as there are bans across the country.

After the meeting, the credit calendar for the issue of dated government and short-term papers will be announced in the evening.

According to the budget, the government plans to borrow Rs 5.36 Lakh Crore from 2020 to 21 Rs, which is higher than Rs 4.99 Lakh Crore, which is estimated for the current fiscal year ending March 2020.

Gross borrowing for the next fiscal year would be 7.8 billion rupees, compared to 7.1 billion rupees estimated for the current fiscal year.

Gross borrowing includes the repayment of previous loans. The repayment of previous loans in the next financial year is tied to 2.35 billion rupees.

Finance Minister Nirmala Sitharaman, who presented the budget for 2020-21, said: “Net market loans for 2019-20 would be 4.99 billion rupees and for 2020-21 5.36 billion rupees.”

“A large portion of the 2020-21 financial year would be used for government investments that have increased by more than 21 percent.

“As I mentioned earlier, an additional approximately 22,000 rupees were provided for equity to fund certain specified infrastructure finance companies that would use them in a variety of ways and would provide the infrastructure sector with much-needed long-term funding. This should stimulate growth in the US economy,” she had said.

The government is collecting funds from the market to finance its budget deficit through dated securities and treasury bills.

The budget has set the budget deficit for the next financial year at 3.5 percent, after 3.8 percent of GDP in the current financial year.

The government had previously estimated the budget deficit for the current fiscal year at 3.3 percent of GDP, but had to increase it due to a lack of revenue and apply the “escape clause” of the Financial Responsibility and Budget Management Act (FRBM).

The “escape clause” enables the government to exceed its budget deficit target by 0.5 percentage points in times of severe economic stress, including periods of structural change and periods of strong growth.