Latest news with #GuaranteeRedemptionFund
The Hindu
4 days ago
- Business
- The Hindu
Lift borrowing limit cuts after launching GRF, Kerala urges Centre
The Kerala government on Tuesday urged the Union Finance Ministry to reverse a ₹3,323-crore cut in its market borrowing limit. The government informed the Centre that it had taken steps to establish a Guarantee Redemption Fund (GRF) — a new requirement under the Union government's borrowing rules for States. After submitting a memorandum to Union Finance Minister Nirmala Sitharaman in New Delhi, Finance Minister K.N. Balagopal said the State had begun the process of constituting the GRF and would start contributing to it within the current financial year. Under revised guidelines issued by the Department of Expenditure for 2025–26, States must set aside either 0.25% of their Gross State Domestic Product (GSDP) or 5% of their outstanding guarantees — whichever is higher — in a GRF. If they fail to do so, the shortfall is deducted from their annual borrowing limit. For Kerala, this has resulted in a reduction of ₹3,323 crore from its approved borrowing ceiling for the first three quarters of the fiscal year. This deduction be reversed once the State formally notifies the GRF, Mr. Balagopal said. 'The government is in the process of establishing the fund. Contributions will begin this year,' he assured in the memorandum, calling the move essential to 'safeguard the financial stability and development trajectory of the State.' Kerala, a revenue-deficit State with high public welfare spending, has faced growing pressure on its finances. The borrowing limit — or net borrowing ceiling — is a critical tool for the State to raise funds through open market operations and meet development needs, Mr. Balagopal said. In addition to the GRF issue, the State has also sought the Centre's reconsideration on an earlier ₹1,877.57-crore deduction. This amount was permitted as additional borrowing in 2023-24 due to changes in GSDP estimates but was later adjusted against the 2024–25 borrowing limit — even though final GSDP figures for that year have not been released. Mr. Balagopal has requested that the adjustment be shifted to 2025–26 in light of more recent, upward GSDP revisions for 2022–23 and 2023–24. The Finance Minister called for 'kind and expeditious intervention' from the Union government to address these matters and help ensure the State's fiscal balance.
The Hindu
21-05-2025
- Business
- The Hindu
₹956.16 cr. cut from Kerala's IGST share, says Finance dept.
Systemic issues in the Integrated Goods and Services Tax (IGST) settlement mechanism has cost Kerala ₹956.16 crore, according to the Finance department. Finance Minister K.N. Balagopal said here on Wednesday that the Centre slashed IGST shares of all States on the grounds that excess amounts had been credited to them. Under this decision, Kerala's IGST share was reduced by ₹956.16 crore. However, there was a lack of clarity regarding the excess settlements, he said. Levied on the interstate supply of goods and services, IGST is collected by the Centre. The accounts are settled periodically and the revenue is shared between the Centre and the States. In July 2024, the Kerala Public Expenditure Review Committee had advised the Kerala government to closely monitor IGST inflow as the present system resulted in revenue loss for it. Talking to reporters here, Mr. Balagopal alleged that the Centre also slashed ₹3,300 crore from the State's borrowing limit in the name of the Guarantee Redemption Fund. The Centre had set a condition that a corpus equivalent to 5% of the government guarantee to financial institutions should be set aside for the fund. Failure to do so would result in a reduction from its borrowing limit equivalent to 0.25% of the GSDP. The open market borrowing limit of the State for the first nine months of the 2025-26 fiscal (April-December) had been pegged at ₹29,529 crore. On the charge that Kerala was plunging towards a debt trap, Mr. Balagopal said that the debt-GSDP ratio of the State had in fact witnessed a steady decrease since 2020-21 from 38.47% to 33.9% in 2024-25. Replying to a question, Mr. Balagopal said formal discussion had not been held yet on the formation of the new pay revision commission.
