Covid crisis: Kerala borrows Rs 1,500-crore via RBI bond auction to pay salaries

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Published: June 5, 2020 1:30 AM

The state has availed a loan of Rs 1,000 crore at an interest rate of 6.55% for 10 years and Rs 500 crore at 5.44% for four years through the central bank’s bond auction on Tuesday.

Kerala government’s monthly wages outgo touches Rs 4,000 crore, of which, Rs 2,450 crore as monthly salary and Rs 1,550 crore as monthly pension.Kerala government’s monthly wages outgo touches Rs 4,000 crore, of which, Rs 2,450 crore as monthly salary and Rs 1,550 crore as monthly pension.

The Kerala government has borrowed Rs 1,500 crore from the market through bond auction by Reserve Bank of India (RBI) to pay its staff salaries and pensions for June. The state has availed a loan of Rs 1,000 crore at an interest rate of 6.55% for 10 years and Rs 500 crore at 5.44% for four years through the central bank’s bond auction on Tuesday.

Kerala government’s monthly wages outgo touches Rs 4,000 crore, of which, Rs 2,450 crore as monthly salary and Rs 1,550 crore as monthly pension.

In the current fiscal, this is the fifth time that the state has tapped the RBI bond auction window. On April 7, during the first round of auctions of state development loans this fiscal, Kerala issued 15-year securities with 8.96% interest, the highest rate by any state.

“This would keep the administrative machinery rolling, but it can be no panacea for the immediate financial crisis,” state finance minister TM Thomas Isaac told FE. He said that the state has suffered a revenue loss to the tune of Rs 39,000 crore, following Covid-19 pandemic and the lockdown.

With the fresh borrowing of Rs 1,500 crore this week, the state’s total debt in the current fiscal has surged to Rs 10,430 crore. RBI’s recent nod to raise the borrowing limit of states allows Kerala to garner loan upto Rs 45,217 crore.

What aggravates the state’s fiscal space is the delay in getting GST reimbursement. “In this score, Centre is yet to transfer GST compensation after November last year,” said KN Harilal, member, state planning board. “Having its entitled GST compensation of Rs 3,000 crore transferred would have helped Kerala at this juncture,” he added.

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