RBI wants states to invest in sinking and guarantee funds mandatorily

Central bank considering the idea of surplus states lending to those in deficit

The Reserve Bank of India (RBI) wants to make it mandatory for state governments to invest in sinking and guarantee redemption funds to provide comfort to investors having exposure to state development loans. The contribution to such corpus is currently voluntary.

The central bank, which acts as a debt manager for the state governments and the Centre, is also considering the idea of state governments with surplus cash lending to the states which are in deficit.

Analysts look at these as potentially good prudential steps to enhance fiscal discipline and profile as states raise more and more resources from market. But implementing