In order to manage state’s liquidity crisis, Dr Haseeb Drabu said that government is considering consolidate and rationalize all government accounts managed in various banks. This he said will help the government in improving the financial indiscipline.
He further said that idle funds parked in over two lakh accounts will be used under norms to manage the ‘acute liquidity shortage’.
He in his speech mentioned that in these accounts there is around Rs 3000-4000 average balance which could be used to manage the liquidity crisis.
If this Fund is created , the government will actually be able to create a larger cushion for its operations. The cushion was lost earlier when the government entered into an agreement with the RBI that took away the J&K Bank’s position as debt manager of the state government. This system made RBI as the sole manager of the government’s business. Now the proposed Fund will manage part of the problem thus offering some flexibility to the government in managing liquidity issues.