RBI relaxes overdraft facility norms for states, UTs until September 30

The Reserve Bank of India (RBI) on Tuesday relaxed rules for states to avail overdraft facilities until September 30, helping cashflow as India enters the the third week of a 21-day lockdown to prevent the spread of the coronavirus.

In a circular, the central bank said it has permitted "greater space" to state governments/ Union Territories for availing overdraft facilities and has also increased the number of days for which a state can be in overdraft.

The number of days for which a State/ UT can be in overdraft continuously has been increased to 21 working days from the current stipulation of 14 working days.

Similarly, the number of days for which a State/ UT can be in overdraft in a quarter has been increased to 50 working days from the current 36 working days.

Earlier, the RBI extended the realisation period of exports proceeds from nine months to 15 months for exports made up to or on July 31, 2020. It has also constituted an advisory committee under the chairmanship of Sudhir Shrivastava to review the ways and means limits for states and Union territories.

For now, the ways and means limit has been increased by 30 per cent for the states and union territories to deal with the situation. This new limit came into force on April 1, 2020 and will stay till September 30, 2020.

On Monday, Business Standard has learnt that Centre has allowed states to avail of up to 50 per cent of their 2020-21 (FY21) borrowing requirements in April itself.

The move became imperative because of the Centre’s resource crunch owing to dwindling revenues and the resultant inability to pay all of the dues of the states under various heads.

A nationwide lockdown has been implemented till April 14 which has adversely impacted economic activities and governments have started diverting their resources to deal with the pandemic.