The conduct of borrowing programme of State Governments is, however, posing several problems. While the market borrowing programme of states in aggregate is well below a quarter of centre’s market borrowings, in a liberalized environment, banks cannot be compelled to subscribe to the programme. It was necessary to provide investors a premium for states’ paper over the centre’s paper of a comparable maturity.
Of late, the premium is widening and differing as between states, while in the case of some states, there have been some difficulties in ensuring subscriptions. In recent years, the increases in states’ borrowing programme over the budgeted amounts have been large with the attendant problems of garnering subscriptions.