The State government’s efforts to convince the Reserve Bank of India (RBI) to raise resources to meet its financial commitments appear to have not yielded fruitful results as the apex bank continued to insist on viability and bankability of the projects for which loans have been sanctioned.
The RBI, in its latest instructions to scheduled commercial banks, expressed concern that banks/financial institutions had been found to have violated instructions which require that in case of projects undertaken by government owned entities, term loans should be sanctioned only for corporate bodies. “Due diligence should be carried out on viability and bankability of the projects to ensure that revenue stream from the project is sufficient to take care of debt servicing obligations and that the repayment/servicing of the debt is not from budgetary resources,” the RBI said regarding bank finance to government owned entities.
The development comes at a time when Finance department special chief secretary K. Ramakrishna Rao has been holding a series of meetings with the RBI officials to seek permission to raise open market borrowings (OMBs). The State could not raise OMBs, except for an ad hoc sanction of Rs. 4,000 crore, with just a fortnight left for the completion of the first quarter during which it has planned to raise Rs. 15,000 crore OMBs.
