The Central Government had switched over to the auction method for its open market borrowing programme since 1993 and in view of the experience described above, it was felt necessary for the State Governments to explore the possibility of adopting a flexible approach with regard to interest rate, maturity, etc., of their borrowings.
It was also felt that in view of inter-State disparities, a gradual and cautious approach was necessary. Based on the consensus at the first Conference of the State Finance Secretaries, an option was made available to the State Governments to enter the market through a flexible approach, on their own, to the extent of 5 to 35 per cent of their gross market borrowings.