Market Borrowings by Government

Definition:
Market borrowings refer to the loans raised by the government from the public through the sale of government securities in the open market.

Explanation:
Market borrowings are a significant source of financing for the government's budgetary needs. These loans are raised by the government through the sale of government securities such as bonds, treasury bills, and other securities to the public. The public includes individuals, banks, financial institutions, and other investors.

Features:
1. Interest Payment: The government pays a fixed rate of interest on these securities to the holders until maturity.

2. Maturity Period: The maturity period of these securities can range from a few weeks to several years.

3. Liquidity: These securities are highly liquid, and investors can buy and sell them in the financial markets.

4. Risk: The risk associated with these securities is relatively low as they are issued by the government, which is considered a safe and reliable borrower.

5. Credit Rating: The credit rating of the government also plays a crucial role in determining the interest rates on these securities.

Conclusion:
Market borrowings are an essential source of financing for the government's budgetary needs. These loans help the government in meeting its expenses, investments, and other financial obligations. The interest rates on these securities are determined by various factors such as the credit rating of the government, market conditions, and demand and supply of the securities in the market.

The capital receipts are loans raised by the Government from the general public. The loan thus raised is termed as market loans.