Follow Us:
Monday, June 01, 2020

Coronavirus lockdown: RBI offers more support to states/UTs

The number of days for which a state or UT — which are strapped for cash in the wake of the coronavirus pandemic — can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days.

By: ENS Economic Bureau | Mumbai | Published: April 8, 2020 3:01:03 am
india lockdown quarantine, Reserve Bank of India, RBI funding, RBI funding to states, RBI funding to UTs, RBI on coronavirus, business news “This arrangement will come into force with immediate effect and will remain valid till September 30, 2020,” the RBI said. (File Photo/Representational)

Giving more flexibility to cash-starved state governments to tide over their cash flow mismatches, the Reserve Bank of India (RBI) has decided to increase the number of days for which a state or union territory (UT) can be in overdraft continuously to 21 working days from the current stipulation of 14 working days.

The number of days for which a state or UT — which are strapped for cash in the wake of the coronavirus pandemic — can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days. “This arrangement will come into force with immediate effect and will remain valid till September 30, 2020,” the RBI said.

Meanwhile, the first bond auction by the state governments in the current financial year on Tuesday witnessed a sharp rise of up to 8.96 per cent in borrowing costs amid speculation that states and the Centre will have to borrow more to fund expenditure plans.

Results of the latest auctions State Development Loans of 10 state governments reveal that Kerala raised Rs 1,887 crore 15-year bonds at 8.96 per cent – 4.56 percentage points more than the RBI’s policy Repo rate of 4.40 per cent.

Rajasthan’s seven-year bond attracted a cut-off yield of 8.31 per cent. The yield on J&K’s Rs 800 crore bond was 8.15 per cent. A total amount of Rs 32,560 crore was raised compared to Rs 37,500 crore on offer. The spread charged by investors rose by 25-40 basis points up to 160 bps.

Of gross borrowings of Rs 7.8 lakh crore in FY21, the Centre has proposed to borrow Rs 4.88 lakh crore, or 62.56 per cent in the first half of the fiscal as against 62.25 per cent done in the previous fiscal. The Budget 2020-21 has pegged the Centre’s net market borrowing — including government securities, treasury bills and post office life insurance fund — at Rs 5.36 lakh crore.

Here’s a quick Coronavirus guide from Express Explained to keep you updated: What can cause a COVID-19 patient to relapse after recovery? | COVID-19 lockdown has cleaned up the air, but this may not be good news. Here’s why | Can alternative medicine work against the coronavirus? | A five-minute test for COVID-19 has been readied, India may get it too | How India is building up defence during lockdown | Why only a fraction of those with coronavirus suffer acutely | How do healthcare workers protect themselves from getting infected? | What does it take to set up isolation wards?

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.

Advertisement
Advertisement
Advertisement
Advertisement