Definition
Market Borrowing (Dated Securities)
Market borrowing is the money the government raises by issuing dated securities — long-term bonds — to investors to finance its fiscal deficit.
The bulk of the central government's fiscal deficit is funded through market borrowing, mainly by auctioning dated government securities (G-secs) of varying maturities via the RBI. Banks, insurers, pension funds and increasingly foreign investors buy these bonds, which set the benchmark risk-free yield curve.
The size of the borrowing programme matters for the whole economy: heavy government borrowing can push up yields and crowd out private credit. The RBI manages the calendar and timing of auctions to keep the programme orderly and borrowing costs contained.
Related terms
- Ways and Means AdvancesWays and Means Advances are short-term, temporary loans the RBI extends to the central and state governments to tide over mismatches in their cash flows.
- Government Securities (G-Sec)Government securities are tradable debt instruments issued by the central or state governments, considered virtually free of credit risk in rupee terms.
- Fiscal DeficitThe fiscal deficit is the gap between the government's total spending and its total revenue, showing how much it must borrow in a year.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.