Banks can invest in state bonds: RBI

In the meeting, Jalan was informed that though cooperative banks in the state had funds and were prepared to invest in the bonds issued by various state corporations, necessary permission was not forthcoming from RBI.

Jalan, however, pointed out that the banks could invest in the approved government securities as per the SLR (Statutory Liquidity Ratio) norms and it was the planning commission which had set the limitfor such investments in the Central and state government securities.

He said this limit had already been exhausted in case of Maharashtra and RBI could do nothing in this matter.

Joshi tried to impress on RBI officials that funds were needed to complete the Krishna Valley Development Scheme as stipulated by Krishna Water Tribunal and provide drinking water to all villages and sought some solution to the problem in view of availability of funds with cooperative banks and their preparedness to invest in state bonds.

it was also agreed in the meeting that the government would pursue with the Planning Commission to widen the limit for banks’ investment in the state securities from next year.

Only yesterday Joshi had held a special meeting with representatives of banks in the state to appeal them to invest in the state bonds, especially in the bonds issued by cash-strapped Krishna Valley Development Corporation (MKVDC).

The MKVDC must block the state’s share of Krishna river water by undertaking andcompleting numerous irrigation projects in the Krishna valley by year 2000 as decided by the Krishna River Tribunal whose award also binds Karnataka and Andhra Pradesh.

The RBI also agreed to issue necessary directives to banks concerned to facilitate payment of salaries to class C and D government employees by cheques.

Jalan was informed that class I and II officers were already paid salaries by cheques and the government was proposing the same system for payment of salaries to class C and D employees.

Although RBI permission was not required for the purpose, its directives to the banks concerned would simplify the procedure for opening accounts and relaxation in rules which are otherwise stipulated by banks for providing the facility.

Jalan agreed to issue the directives at the earliest.