RBI to operationalise buyback scheme for SDLs

Subscribe to Oneindia News

{image-inflation+rbi_19022008.jpg www.oneindia.com}Mumbai, Feb 19: The Reserve Bank of India will shortly operationalise the 'non competitive bidding facility' of State Development Loans (SDLs) following request from some states for arranging buyback of their outstanding SDLs.

The RBI which has formulated a general scheme with the concurrence of the Union Government had formulated the facility with a view to widen the investor base in SDLs. The Apex Bank in its latest monthly bulletin for February said that necessary provisions for formulating such a facility had been incorporated in the revised general notification issued by all the state governments in July last year. At present such non competitive bidding was limited to central government dated securities.

The states had approached the RBI for the buyback in view of the accumulation of surplus cash balances and a negative spread earned on the investment of such balances.

Referring to the annual policy statement of April 2007 in which it had proposed introduction of reissueance of SDLs to build up a critical mass and thereby improving the secondary liquidity of such securities, the RBI said that the feasibiity was being examined taking into account the responses received from the state governments.

Presenting the highlights of the state finances for 2007-08, the RBI urged the fiscally weak states to catch up with the fiscally sound states within 2009-10 as envisaged by the tenth finance commission, which had recommended a uniform target oriented fiscal restructuring path to be attained by all the states by that period.

The Apex Bank said that the overall improvements in the consolidated fiscal position of the state governments did not reveal the wide variation that exist in fiscal performance across the states. Not withstanding a strong commitment by almost all states to carry forward the fiscal correction and consolidation, only a few states accounted for the major part of the overall correction.

State-wise analysis of fiscal correction process indicated that non special category states would account for 85 per cent of the correction in the revenue account and 73 per cent of the correction in fiscal deficit.

The RBI said that improvement in fiscal position of the state governments had resulted from buoyancy in their tax revenues along with the higher current tranfers from the Centre. The state governments would, however, have to device strategies for augmenting resource mobilisation from non tax source revenues. With regard to expenditure management, the state governments may emphasis on improvement in effectiveness of service delivery mechanism.

The states would also need to make continuous efforts towards ensuring the channelisation of resources to meet the development needs in line with the priorities laid down in the 11th five year plan, while initiating steps to bring down the levels of non development expenditure, it said.

The Apex Bank said that the overall improvements in the consolidated fiscal position of the state governments do not reveal the wide variation that exist in fiscal performance across the states. Notwithstanding a strong commitment by almost all states to carry forward the fiscal correction and consolidation, only a few states accounted for the major part of the overall correction.

State-wise analysis of fiscal correction process indicated that non special category states would account for 85 per cent of the correction in the revenue account and 73 per cent of the correction in fiscal deficit.

The RBI said improvement in fiscal position of the state governments had resulted from buoyancy in their tax revenues along with the higher current tranfers from the Centre. The state governments would, however, have to device strategies for augmenting resource mobilisation from non tax source revenues.

With regard to expenditure management, the state governments may emphasis on improvement in effectiveness of service delivery mechanism.

The states would also need to make continuous efforts towards ensuring the channelisation of resources to meet the development needs in line with the priorities laid down in the 11th five year plan, while initiating steps to bring down the levels of non development expenditure, it said.

UNI

Please Wait while comments are loading...