Therefore, conceptually, the budget deficit is the short-term financing availed of by the central Government both from the Reserve Bank and other entities which include banks, financial institutions, state Governments, corporates and other parties. In this set-up, the Reserve Bank is only one of the financing units of the budget deficit.
Net reserve bank credit to the central Government, on the other hand, includes not only the Reserve Bank’s holdings of 91-day Treasury bills but also its holdings of dated securities and rupee coins net of the increase in the central Government’s cash balances.