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Updated April 8th, 2020 at 22:41 IST

Allow states to borrow from RBI, says Kerala Minister

Kerala Finance Minister T M Thomas Isaac on Wednesday flagged concern over high-interest rate for market borrowing and urged the Centre to allow the states to directly borrow from the Reserve Bank

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Kerala Finance Minister T M Thomas Isaac on Wednesday flagged concern over high-interest rate for market borrowing and urged the Centre to allow the states to directly borrow from the Reserve Bank. In a Facebook post, Isaac said Kerala on Tuesday received the first tranche of Rs 6,000 crore through the market borrowing for the current fiscal.

Slamming the Centre over the issue, Isaac said 8.96 per cent interest is being levied on the bonds for next 15 years, despite the Reserve Bank recently reducing the repo rate to 7.25 per cent from 8 per cent. He said he was shocked over the highest interest rate of the decade being levied on the bonds even in the wake of serious financial problems being faced by the states due to the measures taken to prevent the spread of COVID-19. Isaac suggested that the states be permitted to borrow directly from the Reserve Bank.

Making another suggestion, Isaac also said the Centre could borrow an amount from the Reserve Bank and then divide that among the states.

"The Centre is pushing the states in the deep debt by levying exorbitant interest rate. This policy will demolish the basic financial structure of the states. This should be rectified," Isaac said.

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Published April 8th, 2020 at 22:41 IST

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