Kerala stares at overdraft as RBI advance touches limit

SN Jayaprakash

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Thiruvananthapuram: Kerala has to curtail its expenses strictly in the coming days as the state treasury is staring at an overdraft situation after the Onam extravaganza.

State has touched the upper limit of Rs 1683 crore of the Ways and Means Advances (WMA) from RBI. If the situation persists, the functioning and transactions through the state treasury will be disrupted.

State government resorted to WMA- a temporary advance given by the RBI to the government to pass over temporary mismatches in the cash flow of receipts and payments- to pay bills, salaries, benefits and others of employees ahead of Onam season.

By the end of September, the transactions from the treasury are expected to reach 15,000 crores, including Onam payments and regular expenses like salary, pension and loan repayments. Meanwhile, Rs 296 crores were released to solve the crisis of KSRTC.

Despite taking cost-cutting measures to curb expenditure, it is estimated that there will be an additional Onam expenditure of around 6,500 crores compared to last year.

The state government officials said that the government spent Rs 1,400 crore from WMA in the beginning of the Onam vacation itself. When the expenses during the vacation are added, it is likely to be in overdraft by Monday.

It may be noted that the overdraft amount is equal to the Voice and Means Advance limit. The state can go into overdraft for up to 14 days. If it exceeds the limit for five consecutive days, the Reserve Bank will issue a warning to lower it. If it happens again, treasury transactions will be suspended until the situation is resolved by the state by repaying the overdraft amount.

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