RBI issues fresh guidelines for state govt guarantees

The fresh guidelines from RBI come at a time when the Congress government in Telangana is preparing to present its first Budget
RBI issues fresh guidelines for state govt guarantees

HYDERABAD: The Reserve Bank of India (RBI) has issued fresh guidelines for state governments on giving guarantees. “The Working Group on State Government Guarantees” recommended a ceiling for incremental guarantees issued during a year at 5% of Revenue Receipts or 0.5% of Gross State Domestic Product (GSDP), whichever is lower. The working group felt that a reasonable ceiling on the issuance of guarantees is desirable, as their invocation could lead to significant fiscal stress on the state governments. States are therefore expected to exercise prudence and selectivity while extending guarantees, the working group said.

Transparency, sanctity

Though most of the states are in different stages of development with diverse resource availability in terms of GSDP, own tax and non-tax revenue and central transfers, it is desirable for the state governments to consider fixing a ceiling on guarantees issued. Such a ceiling should have clarity, transparency, sanctity and operational relevance and should be backed by legislative statute, it said.

The fresh guidelines from RBI come at a time when the Congress government is preparing to present its first Budget. At present, Telangana limits the amount of annual incremental risk-weighted guarantees to 200% of the total Revenue Receipts of the preceding year. According to the white paper released recently by the Congress government, the government guaranteed loans raised by SPVs but are serviced by government amounts are worth Rs 1,27,208 crore.

Government-guaranteed loans, which are raised and serviced by SPVs, are Rs 95,462 crore and non-guaranteed loans, raised and serviced by SPVs/corporations/institutions, are worth Rs 59,414 crore.

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com