Telangana To Raise Rs 5,000 Crore Loan To Pay High Cost Debt

Hyderabad: The state government has placed an indent to raise Rs 5,000 crore through the auction of bonds by the Reserve Bank of India (RBI) on Tuesday. Sources said the borrowing is part of a loan-swapping exercise aimed at replacing high-interest loans taken during the previous BRS government with new borrowings at lower rates.

The request was submitted to the RBI on November 21, seeking to raise funds in four tranches with extended maturity periods ranging from 13 to 28 years. The fresh borrowing will push the state beyond the Rs 54,009-crore borrowing ceiling fixed by the Union finance ministry for 2025-26, despite four months remaining in the fiscal year.

As of October-end, the state government had raised Rs 50,541 crore under this limit. In November alone, the government mobilised Rs 4,100 crore through auctions held on November 4, 11 and 18, and the upcoming Rs 5,000-crore auction will take this month’s total borrowing to Rs 9,100 crore.

For the October-December quarter, the government planned to raise Rs 9,600 crore through open market borrowings. The government had outlined a series of weekly auctions, including Rs 1,000 crore each on October 14 and 28, November 18 and 25, besides larger tranches scheduled in December. The latest indent seeks Rs 5,000 crore in a single auction on November 25, deviating from the earlier schedule.

Officials said the borrowing strategy is driven by the urgent need to replace high-interest loans contracted for major infrastructure works such as the Kaleshwaram lift irrigation project. Of the Rs 48,000 crore raised in the first half of the fiscal, Rs 32,303 crore was used to service debt linked to these projects, including Rs 11,447 crore towards interest and Rs 20,856 crore towards repayment of principal. Loans taken during the previous regime carried interest rates of up to 12 per cent from commercial banks.

Following repeated representations from Chief Minister A. Revanth Reddy, the Centre in August approved the rescheduling of Rs 25,000 crore of these high-cost loans through RBI at significantly reduced interest rates of 7 to 7.5 per cent. The restructuring has lowered the state’s debt servicing burden and provided fiscal relief.

The state had earlier projected borrowing of Rs 64,539 crore for 2025-26, but this was restricted to Rs 54,009 crore in accordance with FRBM norms.