The Telangana State government finds itself under increasing financial pressure as it rapidly approaches the borrowing limit set by the Union Finance Ministry for the current fiscal year.
Initially, the state government had budgeted for borrowings of ₹64,539 crore for the 2025-26 financial year. However, the Union Finance Ministry later adjusted this, capping the eligible borrowing at ₹54,009 crore under the Fiscal Responsibility and Budget Management Act. As of September 23, the state has already secured approximately ₹46,000 crore, leaving a mere ₹8,000 crore before hitting its stipulated ceiling for the fiscal year.
Telangana’s aggressive fundraising efforts are evident, with the state mobilizing ₹12,000 crore in September alone through Reserve Bank of India (RBI) security auctions, including a significant ₹5,000 crore raised on September 23. This rapid accumulation, combined with ₹33,415 crore in borrowings and other liabilities reported by the Comptroller and Auditor General of India until August, brings the total to roughly ₹46,000 crore by the close of the fiscal’s first half.
A substantial portion of these new borrowings is reportedly being allocated towards restructuring high-interest loans inherited from the previous administration. The aim is to convert them into longer-tenure, lower-interest options, a strategy exemplified by the recent ₹5,000 crore raise at a competitive 7.44% interest rate over 20 years.
Sources indicate that the Central government has approved this loan restructuring plan, recognizing its potential to save the state exchequer thousands of crores in interest payments. This approval comes after Principal Secretary of Finance, Sandeep Kumar Sultania, engaged in discussions with the Union Finance Ministry, articulating Telangana’s financial situation and seeking central cooperation to meet its fiscal obligations.
Despite the current restrictions, senior state officials remain optimistic about securing an increase in the borrowing limit beyond the initial allocation. A high-ranking official from the Finance department confidently stated, ‘We will get more,’ when queried about the state’s borrowing capacity.
The same official confirmed that the loan restructuring process is well underway, and Telangana is expected to reap the financial benefits of this initiative in the near future.