No relaxation in borrowing terms for states, says Finance Minister Sitharaman

There is no proposal under consideration to relax the existing terms for borrowing capacity of the State Governments, Finance Minister Nirmala Sitharaman told Parliament Monday.

“Presently, there is no proposal to relax the existing terms for borrowing capacity of the State Governments including the Government of Kerala,” Sitharaman said in response to a question on whether the government is considering to relax borrowing terms for the state of Kerala.

Kerala had requested for an additional borrowing equivalent to one percent of Gross State Domestic Product (GSDP) over and above the borrowing ceiling fixed for the Financial Year (FY) 2023-24.


Sitharaman added that the centre applies a common yardstick while fixing the annual borrowing limit of all the State Governments under Article 293(3) of the Constitution of India.

“In doing so, it is guided by the recommendations of the Finance Commission,” Sitharaman said.

For the current financial year 2023-24, the Gross Borrowing Ceiling of Kerala has been fixed at Rs. 47,762.58 crore.

Of the total borrowing ceiling, Rs. 29,136.71 crore is Open Market Borrowing (OMB) while the rest is borrowing from other sources.

“Out of the total OMB, consent has already been issued to borrow an amount of Rs. 23,852 crore so far,” the statement said.

Apart from that, the state resorts to borrowing from other sources from time to time as per its requirements.

The Union Government had fixed a higher normal Net Borrowing Ceiling of 4 percent of GSDP in FY 2021-22 and 3.5 percent of GSDP in FY 2022-23, when the states were struggling during lockdown.

She added that the union government has already taken a host of measures in the last three years to make borrowing headroom comfortable for the states including Kerala.

For the state of Kerala, additional borrowing of Rs. 4,060 crore in FY 2021-22 and Rs. 4,263 crore were provided in FY 2022-23 for meeting certain performance criteria in the power sector and similar facility for additional borrowing for performance in the power sector is available to the State Government in FY 2023-24.

The state received an amount of Rs. 36,231 crore as Revenue Deficit Grant from FY 2021-22 to 2023-24 (till November, 2023) and under the Scheme for Special Assistance to States for Capital Expenditure as amount of Rs. 2,141 crore has been released to the State government during FY 2021-22 and FY 2022-23.