BackMore states use RBI's cashflow management windows in FY21, says Icra
According to Icra, 18 states and union territories availed SDF for 2,007 days in FY21 compared to 15 states for 1,635 days in FY20
PremiumMumbai: The revenue shock engendered by the nation-wide lockdown had led to an increase in the number of states and union territories availing the Special Drawing Facility (SDF) and Ways and Means Advances (WMA) facilities of the Reserve Bank of India (RBI) during FY21, relative to FY20.
According to Icra Ltd, 18 states and union territories availed SDF for 2,007 days in FY21 compared to 15 states for 1,635 days in FY20. Moreover, 15 states availed WMA for a total duration of 1,974 days in the pandemic-stricken FY21, compared to 13 states for 1,255 days in FY20. Notably, the number of states resorting to the overdraft facility of the RBI declined to eight in FY21 from 10 in FY20. However, the aggregate utilization of the overdraft facility increased 25% to 443 days led by Telangana, Andhra Pradesh and Nagaland.
Amid the second wave of covid-19, a fewer six states have availed the SDF facility in April-May FY22 as compared to 11 states in April-May FY21. However, the number of states availing WMA and overdraft has risen to eight and seven, respectively, during April-May. At the same time, the aggregate state development loan (SDL) issuances by the state governments during April-May declined by nearly 44% in year-on-year terms.
“Taken together, these trends suggest that liquidity tightness was limited to a few states during the second wave of covid-19," it said.
Icra said it expects the release of nearly half of the goods and services tax (GST) compensation back-to-back loan of ₹1.6 trillion in a single tranche of Rs. 75,000 crore in July 2021, to ease the liquidity situation of the state governments in aggregate in Q2 FY22.
However, states that have not received a large share in this back-to-back loan, may continue to avail of the RBI’s liquidity facilities in the ongoing quarter. The pace of economic recovery and trends in revenue collections and expenditure outgo will crucially determine the cash flow situation, pace of borrowing and usage of liquidity facilities of these states in the near term, it said.
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