MUMBAI, Oct. 23 -- Flagging a sharp rise in state bond yields, the Reserve Bank of India (RBI) has cautioned states against pre-election populist spending and fiscal slippage, especially in Bihar and Maharashtra, four people aware of the matter told Mint.

At a meeting with state finance ministers last month, RBI governor Sanjay Malhotra urged states to keep borrowing in check and adhere to fiscal deficit targets under the Fiscal Responsibility and Budget Management (FRBM) framework - concerns that were not reflected in the central bank's brief post-meeting statement but have since gained urgency amid rising yields and expanding welfare commitments.

Although the RBI released a brief statement after the meeting, the concerns expressed by ...