New Delhi: The Indian government has advised the Reserve Bank of India to issue instructions restraining states from issuing guarantees for co-operative banks.

This was stated by Finance Minister Jaswant Singh while addressing the Parliamentary Standing Committee meeting here. "The consolidated debt of all the states at 35 per cent of the GDP (gross domestic product) is unsustainable and urgent steps are required to rectify the situation," he said.

A mechanism needs to be developed to help the states that which are in financial difficulties, without affecting those who have conducted their affairs well, he said. "States should avoid resorting to competitive structuring of the state annual plan to get higher allocations."