Thiruvananthapuram: The state government is planning to mobilize Rs 2,000 crore from the market by selling government securities through Reserve Bank of India by way of auction scheduled for December 1, 2020.
This is the eighth time the cash-strapped state government has had to opt for market borrowing during the current fiscal. As per rules, the state has the right to raise funds proportionate to 3% of its GDP, with a cap of Rs 6,000 crore for every quarter.
Though the Union government has agreed to increase the borrowing limit to 5%, following the Covid-19-induced crisis in the economy, the state’s limits would remain at 4% of the GDP as it has refused to agree with the conditions set by the Union government.
The monthly wages outgo of the state borders Rs 4,000 crore, of which Rs 2,450 crore is for meeting salary expenses and Rs 1,550 crore for pension expenses.
As is the practice, the government, while describing the purpose of the loan, has stated that the loan proceeds will be used for financing productive development programmes and projects to be implemented in the state.
Consent of the central government has been obtained to the floatation of this loan as required by Article 293(3) of the Constitution, a government notification in this regard stated.
The government security will be sold through the RBI, Mumbai office at a coupon rate to be determined by the central bank at a yield-based auction under multiple price formats. The result of the auction shall be displayed by the RBI on its websites on the same day. The payment by successful bidders will be made on December 2, 2020.
The stock will be of seven- year tenure and would be reckoned as an eligible investment in government securities by banks for the purpose of statutory liquidity ratio (SLR) under Section 24 of the banking regulation Act 1949.