RBI package fails to impress Kerala FM

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April 18, 2020 1:30 AM

For Kerala, this would mean the mandate to borrow up to Rs 18,000 crore to address its capital expenditure squeeze.

Isaac referred to former RBI governor Rangarajan's recent statement on central transfers to the states. (Express photo/ File)Isaac referred to former RBI governor Rangarajan’s recent statement on central transfers to the states. (Express photo/ File)

Reserve Bank of India (RBI) governor Shaktikanta Das did not address three important issues in his speech on Friday, Kerala finance minister Thomas Isaac said. The second package of the RBI is too little, too late, Isaac wrote in a Facebook post.

“The country was keenly listening to know the answers to three questions. One, would agri loans be written off in the wake of farm operations coming to a standstill? Two, will the moratorium on loans be extended to one year? Three, will MSMEs get their current loan restructured with credit to rekindle their business? But then, the RBI governor’s address answers none of these moot questions,” Isaac said.

Isaac referred to former RBI governor Rangarajan’s recent statement on central transfers to the states. “Two decades ago, it was Dr C Rangarajan, who had ended the practice of the state and central governments taking direct loans from the RBI. The same Rangarajan recently said in desperate situations such as the current one, there is no option but to monetise a portion of the debt to the central and state governments. But, on this crucial issue too, the RBI governor was silent,” he said.

At the beginning of the current fiscal, the limit of Centre’s ways and means had been lifted by 60%. But then, that of the state governments had been raised only by 30%. Therefore, raising the ways and means of state governments, presently by 60% from the last fiscal, doesn’t lessen the fiscal squeeze of states to a great extent, Isaac said.

As for Kerala, the state already had the approval to avail Rs 3,159-crore loan from the RBI. It includes way and means advance and overdraft worth its equivalent. The RBI governor’s statement raises this loan to Rs 3,888 crore, an increase of Rs 729 crore. But then, the overdraft, which comes to the half of this amount, has to be repaid within 21 days. And even this ways and means credit facility limit is only up to September 30, Isaac said.

Ideally, the RBI should re-frame the fiscal deficit limit of the states from the current 3.5% to 5%, he said. For Kerala, this would mean the mandate to borrow up to Rs 18,000 crore to address its capital expenditure squeeze. So, the Rs 18,000-crore loan was sought, but the RBI has allowed a mere Rs 729-crore extra loan.

The Kerala finance minister welcomed the central bank’s decision to inject Rs 50,000 crore in a new round of targeted long-term repo operations and urged banks to use the funds to benefit NBFCs and microfinance institutions. He also hailed the Rs 50,000-crore special refinance to pan-India financiers like the Sidbi, Nabard and NHB.

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