State participation necessary to improve govt finances: RBI

Reserve Bank Governor Raghuram Rajan today said growth is slow in picking up even as macro economic parameters have improved, while stressing the role of state governments in improving fiscal performance.
Inaugurating the conference of the Chief Secretaries/ Finance Secretaries and cooperative secretaries of the states, Rajan said there was a need to make State Level Coordination Committees (SLCCs) more active and effective.
He said the progress made by SLCC was satisfactory in conduct of quarterly meetings.
"While India's macro economic parameters have improved, growth was still slow in picking up," Rajan said, emphasising the importance of fiscal consolidation in terms of both, quantitative and qualitative dimensions.

"The State Governments would have a critical role in improving the consolidated fiscal performance of the government sector as a whole," he added.
Rajan also highlighted the need for improvement in governance structure, capitalisation and resolution mechanism in the cooperative banking sector.

He stated that without efficient governance, capital infusion would not benefit the sector, as it would function as a "leaky bucket".
He also emphasised the need for prompt corrective action and much stronger accountability in the co-operative banking sector.
He suggested evolving of effective resolution mechanism, such as, the "good bank-bad bank" model in which good parts of the bank could be identified and segregated from the bad and the bad part could be dealt with appropriately.

SLCCs have been recently reconstituted in each state to monitor unauthorised collection of deposits and they meet more frequently under the chairmanship of Chief Secretaries/ with participation of senior level officials of the states and the regulators, an RBI statement said.
Besides Rajan, Sebi Chairman U K Sinha, NABARD Chairman Harsh Kumar Bhanwala. RBI Deputy Governors H R Khan, Urjit Patel and S S Mundra and other senior government officials attended the conference.