RBI extends overdraft period for state governments and union territories

• RBI during a review decided to increase the number of days from the current stipulation of 14 to 21 days.
  
• The RBI also increased the number of days to 50 from the current stipulation of 36 working days for which a State/ UT can be in overdraft in a quarter.
  
• It also said the changes are temporary and will only be valid until September 30.
  

The Reserve Bank of India (RBI) decided to increase the number of days wherein a state or a union territory can remain in overdraft, today (April 7). Earlier, it was 14 days at a stretch which has been increased to 21 days now.

It said in a statement that the decision came “in order to provide greater flexibility to the state governments to tide over their cash flow mismatches.”


An overdraft is an extension of credit from the lending institution, which is granted when an account reaches zero or minimum balance. The overdraft in this scenario allows the account holder to withdraw money even when the account has zero funds in it or has insufficient funds to cover the amount of the withdrawal.

The RBI also increased the number of days where a state or a UT can be in overdraft in a quarter. It was earlier at 36 days which has been increased to 50.

However, the central bank said that all other stipulations remain unchanged and the arrangement will come into force with immediate effect. It also said the changes are temporary and will only be valid until September 30.

With an aim to check the spread of coronavirus both the central as well as the state governments have taken a slew of measures, including enforcing social distancing among the public.

A nationwide lockdown has been implemented till April 14 which has adversely impacted economic activities and governments have started diverting their resources to deal with the pandemic.

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