Bringing the curtain down on a special dispensation available to Jammu and Kashmir, the Reserve Bank of India (RBI) has entered into an agreement with the state government to undertake its general banking business and act as the sole agent for investment. Following Friday`s agreement, effective April 1, Jammu & Kashmir Bank will not be permitted to provide overdraft to the state government. Unlike other states, the bank, which is majority-owned by the state, provided these services to the state government as part of a special arrangement for J&K. The other states, like the Centre, use RBI`s ways and means advances for overdrafts to meet cash flow mismatches. From April, J & K Bank will act as an agent of RBI to conduct the state government`s general banking business, the central bank said in a statement on Friday. It also said the agreement was signed on the basis of a recommendation from the state government.
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