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.