Centre Cuts FY27 Gross Borrowing by ₹1.2 Lakh Crore

The Centre will borrow ₹7,86,000 crore through dated securities in the second half of 2026-27, the Finance Ministry said on 25 September, trimming its gross market borrowing for the full year to ₹15,99,506 crore. That is ₹1,20,494 crore, or about 7%, below the ₹17,20,000 crore pencilled in at the time of the Union Budget.

The October–March calendar was finalised in consultation with the Reserve Bank of India and includes ₹15,000 crore of sovereign green bonds. It will be conducted through 23 weekly auctions of ₹33,000–36,000 crore each, at an average size of about ₹34,170 crore, according to ThePrint and Business Today. The government has also kept the option of a greenshoe of up to ₹2,000 crore on each security.

Why the number came down

The cut does not change the fiscal arithmetic. Net market borrowing remains ₹11.73 lakh crore, as stated in the Budget, while the fiscal deficit target is unchanged at 4.3% of GDP, or about ₹16.9 lakh crore.

Instead, the lower gross figure mainly reflects debt-management operations carried out earlier in the year. The government swapped bonds maturing in FY27 for longer-dated papers, shrinking the redemptions it must refinance this year. Estimates of the exact size of these switches differ slightly across reports but come to a little over ₹1.1 lakh crore. With those repayments off the table, the Centre won’t need to raise as much fresh money to roll over debt.

In the first half, the government borrowed ₹8,13,506 crore against its target of ₹8.2 lakh crore, broadly in line with plan.

Tilt towards the long end continues

The bias towards longer maturities continues into the second half, which suits insurers and pension funds with long-term liabilities. The 10-year segment accounts for 26.3% of planned issuance, while securities of 15 years and above make up 45.6%, including 9.2% in 30-year bonds, 8.9% in 40-year bonds and 9.9% in 50-year bonds. Three-, five- and seven-year papers account for just 6.9%, 12.1% and 9.1% respectively.

Over October–December, the government will borrow ₹23,000 crore a week in Treasury bills over 13 weeks. Each week, ₹8,000 crore each will be offered through 91-day and 182-day bills, while ₹7,000 crore will be raised via 364-day bills. The ways and means advance limit, which covers temporary mismatches in government cash flows, has been pegged at ₹50,000 crore.

A timely relief for the bond market

The announcement will come as a relief to fixed-income investors after a rough week. Investors around the world dumped government bonds, pushing the US 10-year Treasury yield above 5% and lifting borrowing costs across developed markets. India’s benchmark 10-year government bond yield ended at about 7.12% on 25 September, news reports said.

By shrinking its bond supply in the second half, the government gives the market some breathing room. Banks, insurers and mutual funds will have fewer government securities to absorb, which could help steady yields at a time when foreign portfolio investors have been net sellers of Indian assets and the rupee has been under pressure near the 96-per-dollar mark.

Why it matters for business and investors

Yields on government bonds set the benchmark for corporate bond yields, bank loans and deposit rates. Heavy sovereign borrowing can crowd out private borrowers and push up their costs, so a lighter calendar gives infrastructure companies and others raising money for capital expenditure some breathing room.

Lower supply may support banks’ bond portfolios, though their treasury gains will depend more on global yields. Insurers and provident funds, meanwhile, benefit from the steady supply of 30- to 50-year paper, which helps with asset-liability matching. The ₹15,000 crore green bond allocation keeps India’s sovereign green bond programme going, offering a benchmark for companies looking to raise sustainability-linked funding in the domestic market.

The split between the two halves also matters. At ₹7,86,000 crore, second-half issuance is about ₹27,500 crore lower than the ₹8,13,506 crore raised between April and September, so weekly supply will ease slightly from October. Front-loading borrowing is a long-standing practice that gives the government flexibility later in the year, and the smaller second-half calendar leaves room to adjust if revenue collections surprise in either direction. Bond dealers will welcome the steady weekly auction size of roughly ₹34,000 crore, which helps them plan as volatility runs high across global markets.

What happens next

Auctions under the new calendar begin in October. Bond traders will look to the RBI’s monetary policy decision on 7 October, with the repo rate currently at 5.25%, for signals on liquidity and rates amid higher global yields and elevated crude prices. Global data, including US inflation figures on 30 September, will also shape demand at the early auctions. Any slippage in tax collections or disinvestment receipts could still prompt a revision, but for now the government has chosen to lighten the load on the market.