The Karnataka government raised two more State Development Loans (SDLs) of ₹1,000 crore each on July 21 through the Reserve Bank of India (RBI).
This is the third SDL raised through the RBI in July, with the State government raising ₹1,000 crore on July 14 to meet the challenging financial situation amid COVID-19 pandemic.
With this, so far, the State has raised ₹10,000 crore through the RBI in the current financial year, according to RBI data.
Of the two latest loans, the rate of interest on one is 6.09% for an eight-year tenure and another is 6.12% for a seven-year period.
Along with Karnataka, Bihar accepted a loan of ₹2,000 crore, Kerala ₹500 crore, Maharashtra ₹3,000 crore, and Tamil Nadu ₹2,500 crore on July 21.
An official in the government said, “This is a normal borrowing programme of the government which is budgeted and approved by the State legislature. We will be borrowing more in the coming months as expenditure picks up.”
Karnataka’s borrowing is expected to touch ₹50,000 crore this fiscal year (2020–21), but it would be within the borrowing limit of the State, according to sources.
Expecting a shortfall in revenue owing to COVID-19, the Centre in March raised the borrowing limit of State governments from 3% of the Gross State Domestic Product (GSDP) to 5% in 2020–21. This would make available extra of ₹4.28 lakh crore to all States.
Conditions apply
The Union government has imposed certain conditions and part of the increased borrowing limit would be specific to reforms such as universalisation of One Nation-One Ration Card, ease of doing business, power distribution, and urban local bodies’ revenue.
The Union government increased the borrowing limit of States following letters written by various Chief Ministers and Finance Ministers to Prime Minister Narendra Modi in March.