Monday, 30th October 2017

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More funds to states

RBI eases the rules on withdrawal from the Consolidated Sinking Fund

  • Published 23.05.20, 6:46 AM
  • Updated 23.05.20, 7:26 AM
  • a min read
Medics conduct Covid-19 screening of residents at a camp at Dharavi in Mumbai on Friday PTI

States will get an extra Rs 13,300 crore to fight the pandemic with the RBI easing the rules on withdrawal from the Consolidated Sinking Fund (CSF), which is a buffer maintained by the states with the apex bank to repay their liabilities.

“In the light of the Covid-19 pandemic and the consequent stress on state government finances, the RBI has reviewed the scheme and has decided to relax the rules governing withdrawal from CSF, while at the same time ensuring that the depletion of the fund balance is done prudently,” RBI governor Shaktikanta Das said.

States will now be able to meet a larger portion of their borrowings from the consolidated sinking fund in this fiscal.

“Together with the normally permissible withdrawal, this measure will enable states to meet about 45 per cent of their redemptions due in 2020-21 from CSF. This change in withdrawal norms will come into force with immediate effect and will remain valid till March 31, 2021,” Das said.

“The RBI shall remain watchful and support the smooth completion of the borrowing programme of the Centre and states in the least disruptive manner,” Das said.

Since the Covid-19 outbreak and the nationwide lockdown which has severely affected state finances, the RBI has increased the Ways and Means Advance (WMA) limit by 60 per cent. This was estimated to create a space for Rs 12,000 crore to states.

The central bank had also increased the number of days the states can be in continuous overdraft to 21 days from 14.

The number of days the states can be in overdraft in a quarter was also raised from 32 days to 50 days.