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Manipur govt receives no warning/advice from RBI: Finance Department


RBI does not “warn” state governments on their cash position but instead “advises” the state governments when a ban on treasury operations is likely to occur, the Finance Department said.

TFM Desk

Reacting to recent news report on the Reserved Bank of India warning the state government over Rs 500 crore overdraft, the Manipur government on Friday maintained that it has not been in any danger of a treasury ban in the last financial year 2020-21 and this present financial year 2021-22 till date and no such ‘warning’ or ‘advice’ have been received by the state government from RBI.

The news report also mentioned certain issues regarding resources of the state, payment of salaries and pensions and developmental expenditure, with certain figures claimed to be obtained from reliable sources.

Overdraft (OD) and Ways and Means Advances (WMA) are a special facility provided by the RBI to all state governments for management of their cash position. RBI does not “warn” state governments on their cash position but instead “advises” the state governments when a ban on treasury operations is likely to occur, stated a release by the Finance Department.

There is no limit on the OD that can be availed by the state government, provided the conditions of RBI are fulfilled, the department maintained.

“Overdraft on the state government account happens when there is a mismatch of receipts and expenditure. This is due to various reasons and not necessarily due to developmental programmes. When receipts e.g. tax collection, grants from Government of India, borrowings etc. enter the State Account, the OD is wiped out”.

Loans, mainly Open Market Borrowings, are resorted to regularly by all governments, both central and state to meet their requirements and is not limited to Manipur only. Apart from state’s own resources, developmental works are also taken up through Centrally Sponsored Schemes (CSS) and Externally Aided Projects (EAP), which is the similar scenario in all states, the release added.

The Finance Department also stated that the state government receives the following from the Government of India (Gol), on a monthly basis — Revenue Deficit Grant and Share in Central Taxes.

These are not entitlements but are based on the recommendations of the Finance Commission, which is a constitutional mandate. Apart from these the state also gets its own tax and non-tax resources amounting to an average of Rs. 100-120 crore per month.

Although this has been affected by the effect of the COVID-19 pandemic, it has shown a recovery in the past few months. Therefore, the claim that the government is run only on entitlement of Gol is false, the department clarified.

The release further claimed that the state government has been meeting its committed expenditure — Salaries, Pensions, Loan repayment etc. along with Developmental and Social Expenditure, despite the severe resource constraints on account of the COVID-19 pandemic.

The state government will continue to meet such expenditures in the future, and it is a wrong statement that it will not be able to do so without a loan or a special package, the department said and added that monthly salaries and pensions have also been disbursed timely before the Ningol Chakkouba festival.

Although the state government has received the Revenue Deficit Grant of Rs. 211 crore on November 3, 2021 from the Government of India, there is no record of the Rs. 450 crore as claimed in the news report, the department maintained. 

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