Tamil Nadu

RBI rules on corpus a relief for State

Tamil Nadu maintained ₹6,437 crore in the consolidated sinking fund (CSF) as on March 30, and had the seventh highest balance among the States, according to data from the Reserve Bank of India (RBI).

The RBI on Friday announced relaxation of rules for withdrawal from CSF, which would help States meet the repayment of loans raised through market borrowings through issue of bonds known as State development loans.

The change in withdrawal norms will come into force with immediate effect and remain valid till March 31, 2021.

State governments maintain CSF with RBI as a buffer for repayment of their liabilities. As per the scheme, State governments can contribute 1-3% of the outstanding market loans each year to the fund.

Contribution to the fund is voluntary.

CSF gives States and investors comfort that State development loan payments would be made in all circumstances.

As on March 30, Maharashtra had the highest balance of ₹39,948 crore, followed by Gujarat with ₹13,277 crore, Odisha with ₹13,004 crore, West Bengal with ₹10,730 crore, Andhra Pradesh with ₹8,059 crore and Bihar with ₹7,683 crore in the CSF.

“With States’ revenue choked on the one hand and expenditure rising due to COVID-19, there is pressure on State finances, with loan repayments coming up. CSF is mainly for amortisation of debt, mainly during challenging situations, and this will help ease the burden,” said D.K. Pant, chief economist with India Ratings and Research.

Madan Sabnavis, chief economist, CARE Ratings, said that States that created the fund would now be at an advantage.

“States not maintaining the fund will be looking at the option in the future,” he said.

As per budget estimates, in 2020-21, Tamil Nadu is expected to spend ₹52,616 crore on servicing its debt. This includes ₹16,304 crore towards repaying loans and ₹36,311 crore towards interest payments.

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Printable version | May 26, 2020 9:36:40 AM | https://www.thehindu.com/news/national/tamil-nadu/rbi-rules-on-corpus-a-relief-for-state/article31654350.ece

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