RBI Panel Proposes Raising State Government Loan Limits
A Reserve Bank of India panel proposed increasing the ways and means advances limit for state governments to 678.39 billion rupees to bridge cash flow gaps.
A panel appointed by the Reserve Bank of India proposed on Tuesday increasing the aggregate ways and means advances limit for state governments to 678.39 billion rupees, up from the current 610.08 billion rupees. These temporary loans serve to bridge cash flow mismatches for states.
To improve fiscal discipline, the panel recommended reducing the maximum consecutive working days a state can remain in overdraft from 14 to 10. The panel also urged states to spread market borrowings more evenly throughout the year to prevent concentrations in the fourth quarter.
Further proposals include increasing the eligible Consolidated Sinking Fund corpus available under the Special Drawing Facility from 50% to 75%. Additionally, the panel suggested allowing states with Consolidated Sinking Fund balances exceeding 5% of their outstanding marketable debt and guarantees to withdraw excess amounts freely.
