Cash-strapped Punjab raises fresh Rs 1,000 cr loan, repayment pushed to 2038; state securities pledged
PTC Web Desk: Despite continuing financial stress, the Punjab Government, led by Bhagwant Mann, has moved to raise a fresh loan of Rs 1,000 crore by notifying the sale of 12-year Punjab Government Stock, as per a Finance Department notification issued on January 31.
The borrowing, carried out through an auction by the Reserve Bank of India (RBI) on February 3, comes at a time when the state is grappling with mounting debt and persistent cash-flow constraints.
According to the notification, the loan proceeds would be used to finance capital expenditure and ongoing development schemes, while the Union Government’s consent has been obtained under Article 293(3) of the Constitution, a requirement triggered when states cross prescribed borrowing limits.
Repayment locked till 2038
The government securities would carry a 12-year tenure starting February 4, 2026, with the principal repayment scheduled for February 4, 2038. The interest rate will be determined by the RBI through a yield-based auction, with interest payments due twice a year. Up to 10 per cent of the issue has been reserved for non-competitive bidders, including individuals and institutions.
Assets pledged to raise funds
The notification confirms that the borrowing would be backed by Punjab Government Stock, effectively pledging state securities to raise immediate funds, underlining the government’s dependence on market borrowing to meet expenditure needs.
Payments by successful bidders would be completed on February 4, with the securities qualifying as Statutory Liquidity Ratio (SLR)-eligible investments for banks.
Rising debt burden
Punjab has repeatedly resorted to market borrowings in recent years amid shrinking fiscal space. The state currently ranks among the most indebted in the country, with outstanding liabilities running into several lakh crore rupees, putting sustained pressure on future budgets.
- PTC NEWS
