RBI Governor calls for quality spending, prudent borrowing to strengthen states’ fiscal health

THEBUSINESSBYTES BUREAU

MUMBAI, OCTOBER 27, 2026

Reserve Bank of India Governor Sanjay Malhotra on Tuesday stressed the need for improving expenditure quality, adopting prudent borrowing strategies and strengthening cash management practices to ensure long-term fiscal sustainability of states.

Addressing the 36th Conference of State Finance Secretaries in Mumbai, Malhotra also urged state governments to leverage emerging financial technology platforms, including the Unified Lending Interface (ULI) and Programmable Central Bank Digital Currency (P-CBDC), for Direct Benefit Transfers (DBT), according to an RBI release.

The conference, held on the theme ‘Role of Quality of Expenditure, Effective Cash and Prudent Debt Management in Enhancing States’ Fiscal Sustainability’, brought together finance secretaries from 27 states and three Union Territories, along with senior officials from the Union Finance Ministry, the Controller General of Accounts and the Comptroller and Auditor General of India.

Emphasising the importance of sound fiscal management, the RBI Governor called on states to focus on the quality of public expenditure to safeguard their long-term financial health. He also underscored the need for disciplined day-to-day liquidity management and prudent planning of liabilities to strengthen fiscal stability.

The central bank further encouraged states to onboard the ULI platform and explore the use of P-CBDC for DBT, reflecting a push towards greater adoption of technology-driven financial mechanisms in public administration.

Malhotra also advised state governments to make effective use of the State Level Bankers’ Committee (SLBC) forum to address banking-related operational issues and improve coordination between state administrations and financial institutions.

During the conference, the RBI Governor released a reference booklet titled ‘Compendium on Cash and Debt Management for State Governments’. The publication brings together key concepts, operational procedures and institutional practices relating to cash and debt management, offering state governments a concise reference for strengthening their financial management frameworks.

The conference also deliberated on key aspects of state finances, including aggregate market borrowings by states, short-term financial accommodation provided by the RBI and the implementation of the Benchmark Issuance Strategy.