Group on State loan defaults

After collating the data, RBI may publish the data to sensitise banks and other financial entities. The group is of the view that greater transparency is required to curb the menace.

Defaults on State-backed bonds residing in the books of public sector banks have reached a level of Rs 2,060 crore as on March 31, 2003, rising by a hefty 14.44 per cent during the fiscal 2002-03 from Rs 1,800 crore in the preceding fiscal. The data was collated by the Indian Banks8217; Association IBA.

8220;It will be extremely difficult to gather information on state-backed bonds from the state governments,8221; a source pointed out, adding that 8220;we will deliberate on ways to assess the situation, and to compile data in the forthcoming meetings.8221;

Given the size of defaults with the banks itself, the ministry of finance has recently stipulated that state governments have to take prior permission from the central government before issuing guarantee to a special purpose vehicle SPV. The ministry also categorically said that no borrowings by SPVs should be used to meet the state8217;s budgeted expenditure.