State Finance Secretaries, Rbi Brass To Meet On January 31

State government finance secretaries are meeting with the Reserve Bank of India (RBI) to discuss issues pertaining to improving the finances of the governments.

The meeting, scheduled for January 31 and February 1, is a follow up to the meeting held on November 8 last year.

The issues slated for discussion include the cash management practices of the state governments.

During the course of the last meeting, issues relating to market borrowing by state governments, ceilings on guarantees given, setting up of a consolidated sinking fund, and the cash management practices adopted by the state governments were discussed.

In the meet, it was decided that the RBI would prepare a detailed technical paper on placing a statutory limit on the level of debt of state governments and the modalities for setting up a consolidated sinking fund.

 

A ceiling of 15 per cent of net state domestic product is being mentioned in this connection.

The cash management techniques of the state governments had also come up for discussion. Generally, state governments participate in the auction of 14-day and 91-day treasury bills as non competitive bidders.

With the Reserve Bank planning to delink the bids tendered by the non competitive bidders from the notified amount at the auction of treasury bills, state government will have to explore alternative avenues for short term surpluses.

Regarding market borrowing, the RBI had expressed a view that it was in favour of allowing states to raise a limited portion of their borrowing program through auctions.

According to reliable sources, not more than 30 per cent of total borrowings may be allowed to be mobilised through the auction mode in the immediate future.