The Reserve Bank of India (RBI) today said state governments should improve efficiency through better planning, robust cash management and fiscal prudence to improve their financial health.
Besides improving revenue collections through tax reforms, states should also focus on the expenditure management, RBI Governor D Subbarao said in his address at the conference of state finance secretaries.
On administering micro finance institutions (MFIs), Subbarao said while unincorporated MFIs would be regulated by the proposed central legislation uniformly across states, RBI would regulate incorporated MFIs. This, he said, was necessary to avoid regulatory arbitrage. He also said states should caution the public against entities that raise funds from the public through dubious schemes.
Other issues discussed at the conference were management of cash balances and market borrowings for 2011-12, the repayment/exchange rate risk in borrowing and building sinking funds to meet these obligations.
