RBI to operationalise buyback scheme for state development loans

MUMBAI: The Reserve Bank of India will shortly operationalise the 'non competitive bidding facility' of State Development Loans (SDLs) following request from some states for arranging buyback of their outstanding  SDLs.
  
The RBI which has formulated a general scheme with the concurrence of the Union Government had formulated the facility with a view to widen the investor base in SDLs.
  
The Apex Bank in its latest monthly bulletin for February said that necessary provisions for formulating such a facility had been incorporated in the revised general notification issued by all the state governments in July last year. At present such non competitive bidding was limited to central government dated securities.
  
The states had approached the RBI for the buyback in view of the accumulation of surplus cash balances and a negative spread earned on the investment of such balances.
  
Referring to the annual policy statement of April 2007 in which it had proposed introduction of reissueance of SDLs to build up a critical mass and thereby improving the secondary liquidity of such securities, the RBI said that the feasibiity was being examined taking into account the responses received from the state governments.
  
Presenting the highlights of the state finances for 2007-08, the RBI urged the fiscally weak states to catch up with the fiscally sound states within 2009-10 as envisaged by the tenth finance commission, which had recommended a uniform target oriented fiscal restructuring path to be attained by all the states by that period.