By CL Jose
To borrow Rs1500 cr on May 31; Rs9000 cr was planned for Q1
THIRUVANANTHAPURAM/May 27-2022: Kerala is set to open its account in the state development loan (SDL) book on May 31 with its Rs1500 crore maiden borrowing in the current financial year.
The RBI notification today (May 27) showed that Kerala would raise Rs1500 crore on May 31, by issuing 12-year state development loans (SDLs) or bonds, along with other 10 states (or UTs)
Though the borrowing calendar prepared earlier by Reserve Bank of India (RBI) for the first quarter had showed that Kerala would borrow Rs1000 crore on April 11, Rs5000 crore in May and Rs3000 crore in June, the state was reportedly disallowed to commence market borrowing until the RBI notification came out today (May 27).
There were reports that the Union Government had delayed Kerala’s borrowing as there lacked clarity on the state’s previous borrowings as CAG had flagged serious ‘inconsistencies’ in the whole design of Kerala’s borrowing.
It’s not yet clear whether the Centre has given a go-ahead to the state’s borrowing programme as envisaged at the beginning of the financial year or the Rs1500 crore borrowing permitted to be raised on May 31 is a one-off interim arrangement.
Ever since Kerala Infrastructure Investment Fund Board (KIIFB) embarked on its own unconstrained borrowing programme, albeit with State Government guarantee, eyebrows were raised against the State’s claim that KIIFB’s debt won’t disturb the borrowing limits set for the state.
CAG had time and again raised its objections to this, and had argued that these borrowings need to be accounted for as part of state’s own off-balance sheet liabilities. CAG had also raised questions on how borrowings made by a few other public sector undertakings were also accounted for.
More states face borrowing restrictions
Kerala is not the only state that invited in the Centre’s wrath on borrowings made beyond what is ‘rightfully’ allowed for them in the past.
Until the May 24 SDL auction organised by RBI, eight states – Bihar Kerala, Tamil Nadu, Telangana, Arunachal Pradesh, Meghalaya, Nagaland and Sikkim had not commenced their borrowing during the current financial year. However, three states from that list – Kerala, Tamil Nadu and Meghalaya – will be there in the list of borrowers on May 31.