RBI Relaxes Overdraft Facility Norms for States and Union Territories

The Reserve Bank on Tuesday relaxed norms for state governments to avail overdraft facilities for a longer period until September 30 as they are facing cashflow mismatches amid coronavirus outbreak leading to countrywide lockdown.

In a circular, the central bank said it has permitted "greater space" to state governments/ Union Territories for availing overdraft facilities.

In order to provide greater flexibility to the state governments to tide over their cashflow mismatches, the RBI has increased the number of days for which a state can be in overdraft.

The number of days for which a State/ UT can be in overdraft continuously has been increased to 21 working days from the current stipulation of 14 working days.

Similarly, the number of days for which a State/ UT can be in overdraft in a quarter has been increased to 50 working days from the current 36 working days.

All other stipulations remain unchanged. The new arrangement will come into force with immediate effect and will remain valid till September 30, 2020, the circular added.

With an aim to check the spread of coronavirus both the central as well as the state governments have taken a slew of measures, including enforcing social distancing among the public.

A nationwide lockdown has been implemented till April 14 which has adversely impacted economic activities and governments have started diverting their resources to deal with the pandemic.