India central bank recommends raising advances limits for state governments

Sept 29 (Reuters) - India's central ‌bank-appointed panel ​on ​Tuesday proposed raising the aggregate ways and means advances limit for state governments to 678.39 billion rupees ($7.07 ‌billion) from the current 610.08 billion rupees, while recommending ⁠measures to strengthen states' cash management practices.

Here are the details:

• The panel ‌recommended that states spread market ‌borrowings more evenly through the year and avoid a concentration of issuances in the fourth quarter, which would help ​improve cash management and reduce funding pressures.

• Ways and means advances are temporary loans extended by the Reserve Bank ⁠of India to state governments to help bridge mismatches in cash flows. The limits ​are reviewed periodically based on states' financing requirements and evolving fiscal conditions.

• The committee recommended allowing states ​with Consolidated Sinking Fund (CSF) balances exceeding ‌5% of their outstanding marketable debt and guarantees to withdraw the excess amount freely.

• It also ⁠proposed increasing the share of the eligible CSF corpus that can be availed under the Special Drawing Facility (SDF) to 75% from the ⁠current 50%.

• The panel also suggested reducing the maximum number of consecutive ​working days that a state can remain in overdraft to 10 from 14 at present, noting that this would help foster a sense of ‌greater discipline and encourage states to better assess liquidity needs.

• The share of states issuing government ‌debt has steadily increased in India. Earlier in the year, ⁠heavy borrowing by Indian states ‌had complicated the central ​bank's efforts to lower interest rates.

($1 = 95.9800 Indian rupees)

(Reporting by Anuran Sadhu in Bengaluru; Editing by Shailesh ‌Kuber)

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