Overdraft threat looms again

State may find it hard to mop up Rs.2,500 cr. by October

September 23, 2014 03:32 am | Updated 03:32 am IST - THIRUVANANTHAPURAM:

The government’s financial position is likely to turn precarious yet again. It may slip into overdraft within the next 10 days.

Finance Department sources told The Hindu that if the current cash flow predictions were any indication, the State may start its financial transactions in October on an overdraft.

The government may not have the Rs.2,500 crore needed to disburse the salary and pensions during the first week of October.

State cautioned

The treasury should essentially have a cash balance of about Rs.1,000 crore in the beginning of the month. Finance Department officials are understood to have cautioned the government about the imminent crisis.

As per the borrowing limits set for the State for the next quarter, the government will be able to borrow funds from the market only after October 14. According to the approved financing scheme, the market borrowing ceiling for the current financial year is fixed at Rs.13,950 crore. Already the State has drawn Rs.6,900 crore during the first half of the financial year.

If the State remains continuously on overdraft for five days, above Rs.1,000 crore, the Reserve Bank of India (RBI) will direct the nationalised banks to stop all payments to the government and inevitably all transactions from the treasury will also come to a halt, sources said.

The cash balance position at the end of August was reported to be around Rs.1,081 crore. After meeting the salary, pensions and other commitments such as the festival allowance, bonus, and advances, the State slipped into overdraft between August 5 and 12. Though the government has repaid the overdraft as well as the ways and means advances, the crisis still seems to be hovering and may loom large again. The government will have to go bolster its machinery to garner maximum resources to avert such a situation, the sources said.

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