SRINAGAR: In a strategic move to address fiscal challenges and overcome liquidity constraints, Jammu and Kashmir’s de facto cabinet, the Administrative Council, chaired by Lieutenant Governor Manoj Sinha, has greenlit the establishment of the Consolidated Sinking Fund (CSF) and the Guarantee Redemption Fund (GRF). The initial corpus allocated for each fund stands at a substantial Rs 30 crores.
The Consolidated Sinking Fund (CSF) is a financial reserve earmarked by the Reserve Bank of India (RBI), as mandated by Article 266 (1) of the Indian Constitution. Designed to assist States/ Union Territories (UTs) grappling with financial challenges, including debt management issues, the CSF plays a crucial role in facilitating economic restructuring, particularly for regions burdened with persistent remuneration obligations.
Simultaneously, the newly approved Guarantee Redemption Fund (GRF) finds its place in the Public Account of India, serving the purpose of redeeming guarantees extended to Public Sector Enterprises (PSEs), financial institutions, and more by the States/UT Governments, as and when these guarantees are invoked.
When organisations borrowing funds fail to meet their debt obligations covered under State Government Guarantee, lending Banks and Financial Institutions invoke the State Government Guarantee. This liability then falls on the State Government. The Guarantee Redemption Fund is strategically positioned to handle payment obligations arising from guarantees issued by the Jammu and Kashmir Government in connection with bonds and other borrowings facilitated by UT-level undertakings or other bodies/institutions.
The approval of these funds marks a significant step towards fortifying the financial resilience of the government and ensuring a robust framework for managing contingent liabilities effectively. The move reflects the commitment of the administration to proactively address economic challenges and bolster the overall financial stability of the region.
