RBI may freeze financial transactions of AP to recover borrowed money
news Friday, March 20, 2015 - 05:30
The News Minute | March 20, 2015 | 3:30 pm IST Andhra Pradeshâ€™s financial crisis may worsen after its expenditure crossed the permissible limits. The Reserve Bank of India (RBI) informed the state on Thursday that it had slipped into an overdraft. The state which showed a 7,000 crore deficit budget, had earlier, availed the Ways and Means facility and borrowed 700 crore from the RBI earlier this month. The Ways and Means advances is a mechanism used by RBI to provide cash to the states to tide over temporary mismatches in the cash flow of their receipts and payments. The advances will not have any interest attached to it and have to be repaid within a 30-day period. However, If the state fails to repay it, the amount becomes an â€śoverdraftâ€ť and the government would get an extension of 14 days. If the amount is still not repaid after the 14-day period, the bank charges 9.5% in interest. The state availed another advance of Rs 700 crore this week, making the total advance cross Rs 1,540 crore making it an overdraft. Reports suggest that if the situation worsens further, the RBI may also freeze all financial transactions of the state in a bid to recover the borrowed amount. The Telugu Desam Party (TDP) government was seriously banking on fund from the centre to make up for over its revenue deficit to meet its expenditure needs. Read -Â Why Andhra Pradesh is cash strapped With a row of disappointing packages from the centre, Chief Minister N Chandrababu Naidu is doing all he can to ensure that the state does not hit another hurdle. Unhappy over the raw deal meted out to the state in the union budget, Naidu has decided to meet Prime Minister Narendra Modi to seek justice for his state reeling under the impact of bifurcation. Stating that everybody in the state is disappointed with the budget, Naidu had said it was Modi's responsibility to ensure that Andhra Pradesh gets all the support and its state capital is developed at par with Hyderabad, Bengaluru and Chennai. Naidu reminded Modi that during the election campaign, they gave assurances to people and made promises. "At an election meeting in Tirupati, Mr. Modi had promised that a world-class capital city would be developed which would be better than Delhi," Naidu was quoted as saying. The chief minister also said that he visited Delhi eight times and met the prime minister, the finance minister and others to explain to them the problems faced by his state and the assistance required to overcome them. The state has to now clear all advances taken from the RBI within 14 days, failing which its bank accounts might be frozen. With the state looking to the Centre for a bailout, it now remains toÂ be seen if the financial situation of the state can be bettered. Tweet Follow @thenewsminute
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