Economy

Centre simplifies approval process for states' borrowing limits

Updated : June 26, 2018 06:41 AM IST

States are allowed additional borrowing of upto 0.50% of their GDP every year.

None of the States have asked for higher borrowing limits.

The Centre has simplified the approval process for enhanced borrowing limits of state governments.

As per the new system, applicable from current fiscal itself, instead of clubbing the proposals for receiving the Centre's nod on enhanced borrowing limits by states, the centre will now clear the proposals independently and individually.

Finance ministry officials tell CNBC-TV18, since each State proposal for additional borrowing needs the finance minister's nod, the government had been clubbing such proposals together, for approval from the finance minister.

Under these conditions the wait for some states was longer as the higher borrowing limit was applicable only after all the proposals had been cleared.

So far this fiscal, none of the States have asked for higher borrowing limits. Ministry officials say the demands will now start coming in, depending on the State's fiscal performance.

States are allowed additional borrowing of upto 0.50% of their GDP every year, provided they meet certain stringent fiscal benchmarks in the previous financial year.

A statement issued by the finance ministry said, "During the 4th Meeting of the Governing Council of NITI Aayog on 17th June, 2018, some States pointed-out that the permission accorded by the Department of Expenditure, Ministry of Finance, to eligible States were sometimes delayed due to bunching of proposals received from different States at different intervals into one consolidated approval."

"The Union Government of India, keeping in view its policy for cooperative federalism, has henceforth decided to simplify the process of approval of such additional borrowing limits requested by States. It will process each proposal along with complete information independently as and when it is received in contrast to the earlier process of bunching all proposals into a single proposal," the statement added.

Centre simplifies approval process for states' borrowing limits

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