Bond yields to be down once banks cut rates: RBI

The Reserve Bank of India said on Wednesday the yields on government bonds, an indicator of overall interest rate in the system, will not come down unless the banks soften their interest rates.

"Unless banks cut deposit rates, I don't see bond yields coming down," Reserve Bank Deputy Governor K C Chakrabarty told reporters on the sidelines of a Ficci-IBA banking conference in Mumbai.

He further said government's huge borrowing programme for the current fiscal was not a cause for concern as the central bank was raising funds in a smooth manner without disrupting the normal functioning of the market.

The government in its budget for the current fiscal decided to borrow Rs 4.5 lakh crore (Rs 4.5 trillion) from the market, up from Rs 3.1 lakh crore (Rs 3.1 trillion) in the previous fiscal.

RBI and finance ministry officials will be meeting sometime next week to decided on the schedule of government borrowing for the second half of the fiscal.

The government had earlier decided to complete bulk of the scheduled borrowing for the current fiscal during the first half of 2009-10.

Finance secretary Ashok Chawla told reporters on Tuesday that the government borrowing programme for the current fiscal would be completed by February 2010.