Govt guaranteed borrowings tripled in 5 years

THIRUVANANTHAPURAM: The volume of government guaranteed loans in Kerala has almost tripled in five years until March 2022 according to the statistics available with the Reserve Bank of India (RBI).

While the government guaranteed loans were to the tune of Rs16,248.6 crore as of March end, 2017, the same has reached Rs44,369.9 crore as of March end, 2022 growing by 173 per cent or 2.73 times..

In fact, such loans were only at Rs8,277.4 crore in 2012, meaning that in a decade’s time, these loans have soared more than 5 times or 436 per cent.

Though the statistics on such loans beyond 2022 are not available, according to sources close to the Finance Department, there has been a substantial growth in such loans in the past two years.

The government guaranteed loans grabbed headlines in the past two years after the Centre took a firm stand that the government guaranteed borrowings of Kerala will be viewed as state’s own borrowings while computing the state’s net borrowing ceiling (NBC).

Though the state has guaranteed several large loans, such borrowings made by KIIFB and Kerala Social Security Pension Ltd (KSSPL) in the financial years FY22 and FY23 that amounted to about Rs14,000 core had caught the attention of the Centre.

Kerala Ceiling on Govt Guarantee Act 2003

Though the ‘Kerala Ceiling on Government Guarantee Act 2003’ had mandated only up to five per cent of the GSDP, the state had amended the Act to raise the limit up to 10 per cent of GSDP (FY22,” the finance minister, KN Balagopal, had explained to myfinpoint during an interview.

Government guarantees include the guarantee given by the State Government on behalf of the Government departments, public sector undertakings, local authorities, statutory boards, corporations and cooperative institutions.

The guarantee Act allows the government to charge a minimum of 0.75 per cent per annum as guarantee commission, which ‘shall not be waived under any circumstances’.