Andhra Pradesh is likely to join the list of Most backward states in the country on Monday. The state hampered by the bifurcation is running out of funds and is likely to go overdraft with Reserve Bank of India. The state is avoiding the situation by stopping all the bill payments since January.
However there is no chance now as the year is ending. States do have the facility of 'Ways and Means' and can seek upto Rs 700 crore and another Rs 500 crore under the Special Ways and Means option from RBI. The 1200 Crore thus raised will not attract any interest if they are repaid in 30 days.
Andhra Pradesh had used the 1200 Crore and is unable to repay them in the given 30 days period and is going to seek 200 Crore on Monday. The amount will now be treated as 'overdraft' and the government will be given a final time of 14 days to repay the money. If it failed for the second time then, RBI will charge 9.5 per cent interest.
If Center transfer some funds to the state by Monday, this situation which will affect Investor sentiment very much can be averted. The state has to get funds from center in the form of CST compensation or 13th Finance Commission funds or deficit budget amount etc.
