The cost of central government borrowings has come down by around 45 per cent in the last seven financial years.
The weighted average maturity of outstanding central government debt as of March 31, 2002, was 8.2 years as against 6.5 years as of March-31, 1998.
According to Reserve Bank of India chief general manager, H R Khan, "The weighted average yield on central government borrowings has declined from 13.75 per cent in 1995-96 to 12.01 per cent in 1997-98 and 9.44 per cent in 2001-02. For the period April-August 2002, the weighted average yield works out to 7.53 per cent."
He pointed out that in view of the large and growing fresh borrowings by the government, the need to elongate the maturity profile of government debt was felt so as to minimise the refinancing risk.
The maximum maturity of new loan issues was reduced from 30 years in 1985-86 to 20 years in 1986-87. Thereafter, since 1992-93, the maximum maturity had been telescoped from 20 years to 10 years which continued till 1997-98. In 1998-99, the maximum maturity of loans issued was again raised to 20 years. In 2001-02, the Centre issued a 25-year bond and in the current year a 30 year bond.
The weighted average maturity of loans issued during a year rose from 5.5 years in 1996-97 to 14.3 years in 2001-02. In the current year so far this average maturity of loans is around 12. 3 years.
In the case of state governments, the cost of borrowings declined from 14 per cent in 1995-96 to 12.4 per cent in 1998-99 and 9.2 per cent in 2001-02. For the period April-August, 2002, the weighted average yield is 7.8 per cent.
The maximum maturity of new state loan issues was reduced for from 20 years in 1991-92 to 15 years in 1992-93 and further to 10 years in 1993-94. Since then the maximum maturity of state loans has been maintained at 10 years.
