The Centre and states' combined borrowing through dated securities is expected to surpass Rs 2.2 lakh crore (Rs 2.2 trillion) in the second quarter of this fiscal.
"The Central government plans to borrow Rs 1.6 lakh crore (Rs 1.6 trillion) during October 2009-March 2010 while the state governments together are scheduled to borrow Rs 0.63 lakh crore (Rs 0.63 trillion) during this period," economic think-tank Centre for Monitoring Indian Economy said in its October review.
This borrowing would translate into more than Rs 8,000 crore (Rs 80 billion) worth of government paper hitting the market during the period, it said.
However, a healthy deposit mobilisation will help banks insulate themselves from liquidity pressure due to heavy government borrowing even if the credit demand picks up.
"Deposit mobilisation by banks continues to be healthy at over 20 per cent and is expected to be 20 per cent for the year as a whole," CMIE said.
During the first half of the year, the Central government borrowed nearly Rs three lakh crore and the state governments a total of Rs 0.63 lakh crore. (Rs 0.63 trillion).
The central government had borrowed Rs 1.9 lakh crore (Rs 1.9 trillion) through treasury bills during the first half of the fiscal, CMIE said, adding that a large portion of these borrowing was done through T-bills of 91 days maturity.
"Ninety-one days T-bills borrowings topped Rs 1.6 lakh crore (Rs 1.6 trillion) during April-September, 2009," the think tank said.
In the first the borrowing from these instruments was much lower at about Rs 3.3 lakh crore (Rs 3.3 trillion).
"The central government had borrowed Rs 3.3 lakh crore (Rs 3.3 trillion) by way of treasury bills issued between April-September 2008," CMIE said.