Telangana to Raise Over Rs 10,000 Crore to Repay High-Cost Loans
The state government has already mobilised Rs 66,068 crore through RBI bond auctions during the first three quarters of the fiscal year, from April to December 2025-26.
Hyderabad: The Telangana government has proposed to raise Rs 10,600 crore through open market borrowings in the last quarter of the current financial year (January to March 2025-26), as part of a major debt restructuring exercise aimed at reducing the long-term interest burden on the state exchequer. An indent was placed with the Reserve Bank of India, which conducts the auctions of state development loans.
Official sources said the proposed borrowings would be primarily utilised for loan swapping, a process under which high-interest, short-term loans contracted during the previous BRS government would be repaid and replaced with low-interest loans of longer tenure. The move is expected to result in substantial annual savings by lowering interest outgo and easing repayment pressure over the coming decades.
The state government has already mobilised Rs 66,068 crore through RBI bond auctions during the first three quarters of the fiscal year, from April to December 2025-26. With the latest proposed borrowing of Rs 10,600 crore, the total debt raised by the Telangana government in the current fiscal will rise to Rs 76,668 crore. This figure is significantly higher than the projected borrowing of Rs 64,539 crore provided for in the Budget estimates for 2025-26.
The Centre had initially capped Telangana’s borrowing limit at Rs 54,009 crore for the year, in line with the Fiscal Responsibility and Budget Management norms. However, following repeated representations by Chief Minister A. Revanth Reddy to Prime Minister Narendra Modi and Union finance minister Nirmala Sitharaman, the Union government permitted the state to exceed the FRBM ceiling. The relaxation was granted specifically to facilitate the loan-swapping exercise.
Senior officials explained that several loans contracted during the BRS regime carried interest rates as high as 11 to 12 per cent with repayment periods of 10 to 12 years, placing heavy stress on state finances. The present government secured approval to refinance such liabilities with loans carrying interest rates of around 7 to 7.5 per cent and repayment tenures extending up to 30 years. So far, the Centre has approved the swapping of high-interest loans worth Rs 26,103 crore, while the state has sought permission to restructure loans totalling nearly Rs 87,000 crore.
As part of this strategy, the government has already fully cleared loans of Rs 30,536 crore raised from the Rural Electrification Corporation at an interest rate of 10.9 per cent. Officials said the clearance of both principal and interest using cheaper borrowings would save the exchequer several thousand crores over time. The REC loans, taken between 2016 and 2019, required repayment in 144 instalments between September 2023 and August 2035.
According to the indent placed with the RBI, the state plans to raise Rs 1,600 crore on January 13, Rs 1,000 crore on January 27, Rs 2,000 crore on February 10, Rs 1,000 crore each on February 17 and February 24, and Rs 2,000 crore each on March 10 and March 17, aggregating to Rs 10,600 crore.
