Centre eases open market borrowing norms for states

Centre has eased Open Market Borrowing (OMB) norms for state governments to promote co-operative federalism and bring in more transparency.

Under the simplified mechanism, states would be given one-time consent to borrow funds based on their borrowing calender for the first nine months of the fiscal, a finance ministry statement said.

Thereafter, based on the assessment of details of borrowings and repayment, consent for the first two months of the fourth quarter will be given. The consent for March -- the last month of the fiscal -- will be given based on the re-assessment of actual borrowings for the first 11 months by the states.

"In the spirit of co-operative federalism and in order to bring in transparency and predictability in the OMBs by the states, the Central government has decided to simplify the consent mechanism for OMBs under Article 293 (3) of the Constitution," it said.

Till now, states were required to obtain quarterly consent from the Central government for raising OMBs within the Net Borrowing Ceiling (NBC) fixed for each of the states as per the formula prescribed by the 14th Finance Commission (FFC).

The simplified procedure will ensure that consent under Article 293(3) is issued only on three occasions during the year, one in April for first nine months after fixation of borrowing ceilings, second in December for the first two months of the fourth quarter and the last in March, after the assessment of actual borrowings by the states.