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RBI’s agreement with J&K: fears voiced

Srinagar: The Reserve Bank of India has entered into a supplementary agreement under section 21 A of the RBI Act, 1934, with the J&K government to carryout banking business of the state government. Experts oppose the agreement and term it long run “economic subjugation”. The agreement shall be in force from 1 April 2011.

A handout of the RBI said, “The Reserve Bank of India shall carry out the general banking business of the government of Jammu and Kashmir and act as the sole agent for investment of government’s funds.” The RBI has entered into an agreement with J&K Bank Ltd whereby J&K Bank – state’s premier financial institution would act as an agent of the RBI, for conducting of general banking business of the state government. The RBI has clarified that the RBI has already been acting as a debt manager to the government of J&K since September 1972.

Noted economist of the state, Prof. Nissar Ali told Kashmir Times that the existing system was the unique route available to J&K govt. only. “It used to provide comfortable position to the state to get overdraft from J.K. Bank as it takes time for the state to receive funding from New Delhi.” At present J&K Bank provides an overdraft of Rs 2300 crore to the govt. Prof. Ali believes that the present move would put the state government in the long run in a tight position “as ours is a resource deficient state, so revenue flow is too little.” It would put the govt, according to an expert and push the state towards “total dependence” i.e. an “economic suppression” by New Delhi.

Reacting sharply to the agreement People’s Democratic Party (PDP), in a statement has said that this is the latest and most lethal nail in the coffin of state’s autonomy by National Conference. Mehbooba Mufti said, “the decision removes the last figleaf that the ruling party tried to cover its real intention and duplicity with.” Calling it an enslaving mechanism she feared that this would be the first step towards the liquidation of J&K Bank as a state owned company. She blamed the NC of blunders in the past under Farookh Abdullah and now the remaining is being done by Omar.

This article appeared in The Milli Gazette print issue of 1-15 March 2011 on page no. 18

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