Centre okays T to reschedule Rs 25k cr high interest loans
Sources said the
Reserve Bank of India
has approved the repayment of nearly Rs 25,000 crore in fresh borrowings over the next two years — at lower interest rates and with longer repayment periods.
The move is expected to save Telangana around Rs 2,000 crore annually, compared to the burden under previous terms.
On Aug 5, the RBI disbursed Rs 5,000 crore, which the state govt immediately used to clear old, high interest loans availed from the Rural Electrification Corporation (REC).
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The state had long raised concerns over loans contracted at steep interest rates from private financial entities, often routed through various government-owned corporations.
These borrowings, scheduled for repayment over 10 years, placed a heavy fiscal load on the state exchequer due to their high servicing costs. In contrast, RBI loans come with lower interest rates (7% to 7.5%) and longer tenures of 25 to 30 years, offering significant relief.
By comparison, loans from the REC carried an 11% interest rate and a 10-year repayment term, which became increasingly unsustainable. Chief minister A Revanth Reddy had repeatedly urged the Centre to allow rescheduling of such liabilities.
Following a detailed review of Telangana's fiscal health, the Union finance ministry agreed to the proposal.
In a parallel development, the Centre had earlier brought all off-budget borrowings under the Fiscal Responsibility and Budget Management (FRBM) framework, which reduced Telangana's eligibility to raise funds from the RBI during 2020–21. After these corporate loans were clubbed under FRBM, the state govt intensified its push for rescheduling, which was now accepted by the Centre.
The state has raised funds through monthly bond issuances. With the RBI's green light, it can now rework the Rs 25,000 crore loan burden over two years. Funds raised from bond issues, such as the Rs 5,000 crore obtained recently, will be used solely to retire high-interest loans, not for new programmes or expenditure.
Financial analysts said this restructuring will ease fiscal pressure and save nearly Rs 2,000 crore per year, giving the state room to stabilise its economy.
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