RBI urges states to focus on expenditure quality, prudent borrowing

The Reserve Bank of India (RBI) on Tuesday urged states to improve the quality of expenditure, adopt prudent borrowing strategies and strengthen cash management practices to ensure long-term fiscal sustainability.

Addressing the 36th Conference of State Finance Secretaries here, RBI Governor emphasised the need for states to maintain fiscal discipline through efficient management of their finances.

The conference, held at the RBI's Mumbai headquarters, was attended by finance secretaries from 27 states and three Union Territories, along with senior officials from the Union Finance Ministry, the Controller General of Accounts and the Comptroller and Auditor General of India.

The governor urged states to onboard the Unified Lending Interface (ULI) and use Programmable Central Bank Digital Currency (P-CBDC) for direct benefit transfers (DBT).

He also advised states to make effective use of the State Level Bankers' Committee (SLBC) forum.

The conference, themed 'Role of Quality of Expenditure, Effective Cash and Prudent Debt Management in Enhancing States' Fiscal Sustainability', reviewed several aspects of state finances, including market borrowings by states, short-term financial accommodation provided by the RBI and the adoption of a benchmark issuance strategy by state governments.

The discussions focused on strengthening cash and debt management practices to support states' fiscal sustainability.

During the conference, the RBI released a booklet titled 'Compendium on Cash and Debt Management for State Governments'. The publication brings together relevant concepts, operational processes and good practices in cash and debt management in a concise and accessible format.