State Bank of India rejects AP government’s overdraft of Rs 6,500 crore
The State Bank of India has rejected the Andhra Pradesh government’s “overdraft” of Rs 6,500 crore for the implementation of central sponsorship programs (CSS) in the state.
With its coffers completely empty, the state government demanded that the overdraft be used as working capital by five node executing agencies “against the securitization of fund balances available in single node accounts (SNAs)”.
The state has sought to sequester central funds in the SNA and increase the overdraft and as a result, Finance Secretary (Budget and Institutional Finance) KVV Satyanarayana wrote a letter earlier this month to the SBI requesting a sanction. of Rs 6,500 crore.
The “unusual and unheard of” request from the finance secretary left senior officials bewildered as it only further exposed the state government’s perilous financial situation.
“Seeking a (regular) loan is one thing, but trying to get an overdraft by sequestering central funds is quite reckless. It could also attract the wrath of the Center and jeopardize the schemes, “observed a senior official.
To implement CSS, the state government is required to share a portion (up to 40 percent) of the overall cost of each scheme.
The Union Expenditure Department (DoE) this year introduced new rules to ensure the flow of funds to states for CSS, under which the state is primarily required to open a single node account at a bank. commercial program for each scheme, listed in the Centre’s Public Financial Management System.
The new rules aim to ensure “efficient management of cash flow and improve transparency in the management of public expenditure”.
Officials say the Centre’s new system was primarily aimed at preventing the misappropriation of CSS funds for “other purposes” by the state government. The funds will be released strictly on the basis of the balances (central share and state share) available in the SNA, in accordance with DoE rules.
While the Center releases 25 percent of the plan amount at the start of the fiscal year, the release of the additional central portion will be based on the transfer from the state portion stipulated in the SNA.
The new rules have only exposed the state of AP’s finances, as it is unable to transfer any amount to SNAs for any CSS whatsoever.
“More than Rs 6,000 crore of central funds are blocked so far this year because we cannot contribute to different CSS. Unless we not only release the money (part of the state) but we the expenses also in accordance with there is no way to get the releases from the Center, ”said a principal secretary.
There has been no progress in any of the PA’s CSS due to a severe shortage of funds, he stressed.
With no other choice left, the state desperately wanted to borrow money from the banks to fulfill its share in the CSS.
“The request for the overdraft facility cannot be accepted as it does not comply with the Bank’s policy guidelines and regulatory guidelines for loans to Crown corporations,” said the SBI, in response to the secretary’s letter. to Finance.
Interestingly, the state government earlier this month appointed retired SBI Chairman Rajnish Kumar as Adviser (Economic Affairs), with the rank of Cabinet Minister, given his “extensive experience in the management of large loans and project financing “.
This, apparently, did not cut the ice with the management of the bank.
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