RBI urges restraint on WMA usage by the state governments

The Reserve Bank of India’s (RBI) governor Bimal Jalan has urged restraint in the use of the ways and means advances (WMA) or overdrafts from the RBI by states, while stressing the importance of harmonious relationship between the central government and the states in management of finances and in maintaining integrity of financial systems and financial stability.

Addressing the bi-annual meeting of the state finance secretaries on Friday, Jalan expressed concern over the fiscal situation of the states, and highlighted some of the current issues such as market borrowings by the them, guarantees given by them to various public sector undertakings under their fold, as also borrowings by state-level undertakings themselves, RBI said in a release on Saturday.

Finance secretaries of 24 states participated in the meeting, included C.S. Rao, secretary (expenditure), Ministry of Finance, GoI, and Usha Sahajpal, comptroller general of accounts representing the Centre. RBI deputy governor Dr Y.V. Reddy chaired the conference for state financial secretaries, which is being hosted by RBI since 1997.

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Jalan urged the finance secretaries forum to apply its collective mind to focussing on related issues to enhance fiscal sustainability in national interest.

He stated that given the rigidities in expenditure management, there was also a need to concentrate on the asset side where governments have already built tremendous assets, in the form of public sector undertakings and services provided by them.