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State governments should opt for NSSF to tide over huge revenue shortfall ..


Ankur Bhattacharya

Kolkata, Aug 29 (HS): India's largest public sector Bank and lender State Bank of India (SBI) has suggested the states to opt for the newly set up 'National Social Security Fund' (NSSF) as an autonomous source of finance to tide over the Rs 3 lakh crores worth of revenue shortfall from GST this year.

Publishing an in depth research report by its Economic Research wing on how to mitigate the problem of this huge shortfall from GST this year, top SBI sources here quoting their Group Chief Economic Advisor, Soumya Knati Ghosh informed Hindusthan Samachar that NSSF was akin to a Special Purpose Vehicle (SPV) to provide an autonomous source of finance to mobilise small savings through post offices and banks to lend against non-tradable securities. 

These securities would be issued by the states till it was discontinued as the special securities with a rate of interest of 9.5 per cent, even if that was considered too high by them, Ghosh said adding under this circumstances, "We recommend that in the current extraordinary situation the states should be allowed to tap NSSF at a concessional rate of interest so that their reliance on open market borrowings is reduced."

But this would require continuous discussions at the highest level including  the Finance Commission, the sources quoting Ghosh said.Referring to some other options to get over the crisis he said, "Though the government had given option to the states to borrow as much as Rs. 2.35 lakh crore over and above Rs. 4.28 lakh crores allowed to them under the 'Atmanirbhar' package, the constitution had imposed certain restrictions on the borrowings by the state governments."

"As such the state without the consent of the Centre might not be able to raise any borrowings if it had any previous record of having loan outstanding repayable to the Union government," Ghosh said.
Moreover, he said that under the constitution no state government, unlike the Centre, could borrow externally. The Centre always plays the role of an intermediary in the transfer of external borrowings to states. 

Hindusthan Samachar