Reserve Bank of India (RBI) Governor Sanjay Malhotra has urged State governments to adopt prudent borrowing strategies, improve the quality of public expenditure and strengthen cash management to protect their long-term financial health.
Speaking at the 36th Conference of State Finance Secretaries in Mumbai on October 27, 2026, Malhotra highlighted the importance of balancing development spending with sustainable debt management. He also encouraged States to make better use of the State Level Bankers’ Committee (SLBC) forum to strengthen coordination with banks.
Track RBI+1
Fiscal Discipline and Quality Spending in Focus
The conference was held under the theme “Role of Quality of Expenditure, Effective Cash and Prudent Debt Management in Enhancing States’ Fiscal Sustainability.”
The RBI Governor emphasised that the long-term financial position of State governments depends not only on how much they spend and borrow, but also on how effectively public funds are used.
Prudent borrowing can help governments finance infrastructure and development projects while managing future repayment obligations. At the same time, better expenditure planning can help ensure that limited public resources are directed towards clearly defined priorities.
Efficient cash management is also important. Governments need to coordinate incoming revenue with planned expenditure so they can meet payment obligations and reduce avoidable short-term borrowing.
States Asked to Strengthen Banking Coordination
Malhotra advised State governments to make effective use of the SLBC forum, which brings together banks, government departments and other stakeholders to address banking-related issues.
The platform can support coordination on credit availability, financial inclusion and the implementation of government programmes. Better communication between State administrations and financial institutions can help identify local financing challenges and improve access to banking services.
The Governor also encouraged States to adopt the Unified Lending Interface (ULI), a digital platform designed to facilitate access to credit by enabling the exchange of relevant financial information between lenders and service providers.
Track RBI+1
Push for Digital Transfers and Improved Debt Management
The RBI Governor encouraged States to use Programmable Central Bank Digital Currency (P-CBDC) for Direct Benefit Transfers (DBT). Programmable digital currency can incorporate conditions governing how funds are used, depending on the design of the transfer programme.
The conference also reviewed State governments’ market borrowings, short-term financial assistance provided by the RBI and the adoption of a Benchmark Issuance Strategy. Such a strategy can help governments organise debt issuance around standard maturities and improve borrowing planning.
During the event, Malhotra released the Compendium on Cash and Debt Management for State Governments. The publication brings together key concepts, operational processes and practices intended to help officials manage government cash balances and debt more effectively.
Track RBI+1
Senior Officials From States and Union Territories Attend
The conference brought together finance secretaries from 27 States and three Union Territories, along with senior officials from the Union Ministry of Finance, the Controller General of Accounts and the Comptroller and Auditor General of India.
The discussions focused on strengthening fiscal management practices across State administrations. The recommendations and tools highlighted at the conference are intended to support more disciplined borrowing, effective use of public funds and improved management of financial obligations.
For organisations working with government-linked projects or operating across financial markets, changes in public borrowing and expenditure priorities can also affect planning and investment decisions. Sound strategic advisory can help businesses assess financial risks and make informed decisions in a changing economic environment.
Conclusion
The RBI’s message to State governments centres on three priorities: borrowing responsibly, spending public money effectively and managing cash flows efficiently. Greater use of banking coordination forums and digital financial infrastructure also featured in the Governor’s recommendations.
The impact of these measures will depend on how States implement them in their budgets, borrowing programmes and public service delivery systems. Sustained attention to transparency, repayment capacity and spending outcomes will remain important to long-term fiscal sustainability.