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Centre increases borrowing limit of states from 3 to 5%

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In a major relief to the state governments, Finance Minister Nirmala Sitharaman on Sunday announced an increase in the borrowing limit of the states from 3 per cent to 5 per cent for the financial year 2020-21 only.

The Centre’s move will give states extra resource of Rs 4.48 lakh, the minister said.

“The Centre has decided to accede to the request of the states of increasing the borrowing limit from 3 per cent to 5 per cent, for 2020-21 only,” she said.

In her fifth and the last trance of the coronavirus relief package, Sitharaman said that the states’ net borrowing ceiling for 2020-21 is Rs 6.41 lakh crore, based on 3 per cent of the Gross State Domestic Product (GSDP).

She further said that the states have so far borrowed only 14 per cent of the limit authorised, of which 86 per cent of the borrowing remains unutilised. “However, they still are asking for a special increase.”

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