Centre to Borrow ₹8 Lakh Crore in H1 FY26, Covering 54% of Annual Target

The government proposes to borrow ₹8 lakh crore from the bond market during April-September of the next financial year (FY26), constituting 54% of the total budgeted borrowing of ₹14.82 lakh crore. This also involves ₹10,000 crore that will be raised through sovereign green bonds in the first half of the financial year.

The borrowing will be spread over different tenures, such as government securities falling due in 3, 5, 7, 10, 15, 30, 40, and 50 years. To effectively manage debt commitments, the government will undertake buybacks and exchange operations for outstanding securities. Apart from this, the Reserve Bank of India (RBI) has also fixed the Ways and Means Advances (WMA) ceiling at ₹1.50 lakh crore for H1 FY26, which will facilitate fill-in of short-term financing needs.

In the Q1 of FY26, the Centre plans to mobilise ₹19,000 crore every week through Treasury bills. Remarkably, more than 26% of aggregate market borrowings will be through 10-year government bonds. The Centre will also be in a position to accept an over-subscription of up to ₹2,000 crore through greenshoe mechanism for each security auctioned.

The gross borrowing estimate for FY26 is much greater than the last fiscal year, mainly because of the repayment of Covid-19 loans falling due during the year. For comparison, the borrowing of the government in 2024-25 is ₹14.01 lakh crore. Net-wise, bond market borrowings are anticipated to be slightly less at ₹11.54 lakh crore (3.2% of GDP) in FY26, against ₹11.63 lakh crore in FY25.

The Centre borrows through instruments like bonds and Treasury bills to finance public spending, infrastructure development, and other core services. The government's borrowing strategy is the most important factor influencing interest rates in the economy. An increased borrowing requirement has the tendency to increase bond yields by sovereigns as well as companies, while decreased borrowing typically leads to lower interest rates.