Govt says borrowing to remain front-loaded

By Rajkumar Ray and Rajesh Kumar Singh

NEW DELHI (Reuters) - The government will try to raise most of its record borrowing needs by the end of September to leave more room for private borrowers in the second half of the 2009/10 fiscal year, the finance secretary said on Wednesday.

Officials from the central bank and finance ministry will meet on Thursday, a day earlier than planned, to finalise the calendar for record gross market borrowing of 4.51 trillion rupees ($93 billion) in the 2009/10 fiscal year (April-March).

Markets were spooked last week when the borrowing target was raised by a quarter from 3.6 trillion rupees as the government looks to fund a deficit now seen widening to a 16-year high of 6.8 percent of gross domestic product.

"The market certainly has appetite today because there is lot of liquidity," Finance Secretary Ashok Chawla said. "Therefore, we are trying to borrow more directly at this stage."

Weekly auction sizes have ranged between 120 billion and 150 billion rupees since April, and Chawla said the size was unlikely to come down until September.

Bond dealers say that the market was comfortable with auctions of 150 billion rupees every week for now, as there was demand from banks for meeting their statutory liquidity reserve requirements and liquidity conditions were easy.

Chawla said the central bank would support much of the borrowing programme by buying bonds from the open market, as it has already been doing, to ensure adequate funds in the market.