RBI not sure states' cash surplus enduring: Mohan

Reserve Bank of India's deputy governor, Rakesh Mohan has said the Central bank wasn't sure if the high cash balances currently held by state governments would last.

According to Mohan, a host of factors, including a rise in devolution of funds from the Central government, as per the 12th Finance Commission's recommendations contributed to the surplus.

Mohan also said states have been getting the entire amount collected in small savings schemes of the Centre. States used these to retire high cost loans taken from the Centre earlier, but have no such avenues now, he said.

"This was the first year they (states) were getting 100 per cent of small savings but there was no debt swap. Therefore, the cash balances built up," Mohan said.

According to finance minister P Chidambaram, states are running about Rs 45,000 crore of surplus balance.

"It is not clear whether this (surplus) is frictional situation or durable situation, but is it something that will continue for sometime or is it something that is transitional in terms of the kind of cash balances that they had, that I think will have to be seen," Mohan said.

On the international interest rate scenario, Mohan said the external developments had to be carefully monitored.

"We will continue to monitor global developments. But, at the same time of course, we look at our own domestic developments as do all central banks."

Mohan was speaking at the inaugural session of 8th annual conference of Fixed Income Money Market Derivatives Association and the Primary Dealers Association of India.

Mohan also said he expects the housing loan growth to continue. Earlier, the RBI had expressed concerns over the pace of growth in banks' retail loans, which includes housing loans to a large extent.