RBI relaxes rules for withdrawal from CSF; States may get extra Rs 13,300 cr

In a bid to provide more resources to states, the Reserve Bank of India (RBI) on Friday eased the rules governing withdrawal from the Consolidated Sinking Fund resulting in release of additional Rs 13,300 crore to them.

State governments maintain a Consolidated Sinking Fund (CSF) with RBI as a buffer for repayment of their liabilities.

"In the light of the COVID-19 pandemic and the consequent stress on state government finances, the RBI has reviewed the scheme and has decided to relax the rules governing withdrawal from CSF, while at the same time ensuring that depletion of the Fund balance is done prudently" RBI Governor Shaktikanta Das said.

This will enable states to meet a larger proportion of their redemption of market borrowings due in the current financial year from CSF and these relaxations to states will release an additional amount of about Rs 13,300 crore, he said.

"Together with the normally permissible withdrawal, this measure will enable states to meet about 45 per cent of their redemptions due in 2020-21 through withdrawal from CSF. This change in withdrawal norms will come into force with immediate effect and will remain valid till March 31, 2021," he said.

In response to COVID-19, the Governor said, the requirement of fiscal resources has increased with likely implications for market conditions going forward.

"The RBI shall remain watchful and support the smooth completion of the borrowing programme of the Centre and states in the least disruptive manner," he noted.

Last month, the RBI increased Ways and Means Advance (WMA) limit of states by 60 per cent.

This was estimated to create a space for Rs 12,000 crore for state governments looking to raise money.

"It has now been decided to increase the WMA limit of states by 60 per cent over and above the level as on March 31, 2020 to provide greater comfort to the states for undertaking COVID-19 containment and mitigation efforts, and to plan their market borrowing programmes better," RBI had said.

The central bank had also increased the number of days states can be in continuous overdraft to 21 days from 14, and the number of days states can be in overdraft in a quarter was raised from 32 to 50 days.