THIRUVANANTHAPURAM: Kerala Social Security Pension Ltd (KSSPL) has become the largest borrower of Kerala Financial Corporation (KFC) with an exposure of Rs1,000 crore.
Until recently, KFC’s exposure to KSSPL was to the tune of Rs650 crore, and with the recent disbursement of an additional Rs350 crore to KSSPL, the total exposure increased to Rs1,000 crore.
The other top borrowers of KFC include Kerala State Electricity Board Ltd (KSEBL) at Rs867.89 crore; Kerala Infrastructure Investment Fund Board (KIIFB) Rs791.71 crore and Vizhinjam International Seaport Ltd (VISL) Rs337.62 crore.
With the additional loan to the KSSPL, total exposure to the four state-related entities accounts for more than 40 per cent of KFC’s loan book, the size of which is estimated at about Rs7,200 crore as of June end, 2024.
Govt determined to clear dues
Kerala Government has recently allowed KFC to act as an agent of the Kerala Government to provide loans to KSSPL. Earlier, KFC had given Rs500 crore loan to KSSPL at 7.75 per cent without government guarantee.
Kerala Chief Minister Pinarayi Vijayan has announced that all the dues in welfare pension will be cleared through 2024-25 and 2025-26 fiscals.
The government is leaving no stone unturned in addressing the pension distribution issue, which has become a focal point of political debate across the state
The CM has also indicated the government’s intention to increase the welfare pension amount from the present Rs1,600 per beneficiary in due course.
Legal Framework under SFC Act
Section 25(1)(e) of the State Financial Corporation Act, 1951, allows KFC to act as an agent of the Kerala government for providing loans and advances. KFC has previously acted in this capacity for other Public Sector Units (PSUs).
As per a Kerala Finance Department statement, the interest rate was later raised to 9 per cent and the government provided a guarantee for this loan.
The government approved appointing KFC as its agent for a Rs1,000 crore loan, with the interest rate for the loans to be negotiated between KSSPL and KFC.
This arrangement allows KFC to mobilise funds and provide loans to KSSPL while acting as the state government’s financial agent.
Welfare pension backlog
The government has been under pressure to mobilise funds to clear the backlog of the welfare pension that has been in dues for several months now.
Some political experts argue that the long-pending dues of welfare pensions may have played a significant role in turning the tide against the LDF government in the recent parliamentary elections.
This delay in payments, coupled with growing public frustration, likely influenced voter sentiment and contributed to the government’s performance at the hustings.
