Faced with the mounting interest burden of high-cost loans obtained in the past, the Telangana Government has reportedly decided to swap the high-interest loans with low-interest borrowings so as to ensure that it can save significant amounts in the coming days.
The effort can be seen from the fact that the Government has opted for low-interest open market borrowings through the auction of securities conducted by the Reserve Bank of India (RBI) in the past few weeks.
The State Government raised a huge ₹5,000 crore through the auction of securities on August 5, with interest rates pegged around 7.1%. It has raised ₹3,500 crore on July 29 with interest rates of 7.15% to 7.16%, and the same is the case with ₹2,500 crore raised on July 15 with interest rates pegged at 7.1%. Though the tenure of the borrowings is longer, they are likely to come in as a cushion to the Government owing to their low interest rates.
The development follows the huge loans obtained by the BRS Government at high interest rates, which have become a burden on the State Government that is forced to pay interest of around ₹25,000 crore since the last two fiscal years.
Chief Minister A. Revanth Reddy said, during his Independence Day address on Friday, that the Government completed debt servicing of ₹2.2 lakh crore, which included principal of ₹1.32 lakh crore and interest component of ₹88,178 crore since the Congress assumed power less than two years ago, indicating the seriousness of the issue.
Senior officials said the low-interest loans will help set off the high cost of government debts, but not the off-budget borrowings. OBBs are primarily financed by the financial institutions which cannot be swapped, senior officials said.
Keeping this in view, the government addressed a communication to Union Finance Minister Nirmala Sitharaman seeking her approval for the restructuring of high-interest loans. The communication cited the loan of ₹31,795 crore raised by the Kaleshwaram Lift Irrigation Scheme SPV from the Power Finance Corporation and Rural Electrification Corporation with interest rates ranging from 10.75% to 11.25%.
“Additionally, I would like to bring to your notice that several projects initiated with high interest loans remain incomplete due to various reasons resulting in sub-optimal yields compared to their original projection,” the CM said, seeking the Union Finance Minister’s intervention in directing the financial institutions like PFC and REC to restructure loans that were extended to the SPVs/corporations.
Published – August 15, 2025 07:32 pm IST
