J&K Administration creates two funds to tide over liquidity crunch

Jammu, January 22

To meet the fiscal challenges and liquidity constraints, the Administrative Council, which met here under the Chairmanship of Lieutenant Governor Manoj Sinha, approved constitution of the Consolidated Sinking Fund (CSF) and the Guarantee Redemption Fund (GRF) for meeting contingent liabilities of the administration with an initial corpus of Rs 30 crore for each fund.

Rainy Day funds

• Administrative Council approves constitution of Consolidated Sinking Fund (CSF) and the Guarantee Redemption Fund (GRF)
• CSF and GRF will meet contingent liabilities of admn with an initial corpus of Rs 30 crore for each fund
• CSF promotes economic restructuring in states/ UTs, especially those with chronic remuneration obligations
• GRF is established for redemption of guarantees given to PSEs, financial institutions, etc. by states/UT govts, whenever such guarantees are invoked

Rajeev Rai Bhatnagar, Adviser to the Lieutenant Governor; Atal Dulloo, Chief Secretary; Mandeep Kumar Bhandari, Principal Secretary to L-G, attended the meeting.

Consolidated Sinking Fund (CSF) is a reserve fund set aside by the Reserve Bank of India (RBI). The provision for this fund is made in Article 266 (1) of the Constitution. Consolidated Sinking Fund is to aid states/ UTs wherein the government has problems handling their finances, including debt. CSF promotes economic restructuring in states/UTs, especially those with chronic remuneration obligations.

“A Guarantee Redemption Fund (GRF) is established in the Public Account of India for redemption of guarantees given to PSEs, financial institutions, etc. by states/UT governments, whenever such guarantees are invoked,” an official said.

When the borrowing organisations fail to service their debt burden covered under state government guarantee, the lending banks/ financial institutions invoke this guarantee. “This becomes liability of the state government. The GRF shall be utilised for meeting the payment obligations arising out of the guarantees issued by the UT administration in respect of bonds issued and other borrowings by the UT level undertakings or other bodies/ institutions,” the official said.