RBI Seeks Open Reporting System For State Guaranteed Debts

Mumbai, Aug 30 | Updated: Aug 31 2004, 05:30am hrs
An RBI working group has underscored the need for consolidating and sharing of information on state government guaranteed advances and bonds to promote market discipline and effective supervision of financial intermediaries subscribing to bonds and providing advances.

States have been issuing a large number of guarantees to the state-level institutions to enable them to mobilise resources for investment in infrastructure and for promotion of rural development. As on end-March 2003, total outstanding guarantee of 17 state governments was at Rs 1,84,294 crore as compared to Rs 1,65,386 crore a year ago, RBI said in the report.

The outstanding guarantees of the state governments as a proportion to their gross domestic products (GDP) was 7.5 per cent as March 31, 2004 as against 7.2 per cent as on end-March 2003. The devolvement of guarantees on a state government has implications for its debt sustainability and overall financial stability, the RBI said. A centralised database is required to meet the needs of various regulators as also to serve as a useful input for policy formulation. Data requirements in respect of guaranteed loans and advances cover state-wise, borrower-wise and sector-wise information and details of formal guarantees and letters of comfort issued by the state governments, the working group under the chairmanship of G Padmanabhan said. There are several gaps in the present reporting system. The only source of data is off-site surveillance returns furnished by commercial banks, non-bank finance companies and All India finance institutions that are under RBIs supervisory purview.