Kerala Settles for Lower Loan Amount of Rs 3000 cr After Rejecting Centre’s Offer

Kerala, after initially rejecting the Centre’s offer of a Rs 5,000 crore loan sanction in the Supreme Court, eventually decided to accept it. However, the Centre later informed that providing the full amount was not feasible and eventually settled for a lower sum of Rs 3000 crores under pressure from the state. This decision came with the condition that the borrowed amount would be included in the borrowing limit for the current financial year, a condition that Kerala had previously declined.

Anticipating the issuance of a notification regarding the credit limit for the new financial year, Kerala sought temporary permission to borrow the required amount in court. With no notification received by April 9th, the state opted to accept the previously rejected condition and proceed with borrowing Rs 3000 crores. This fund is intended for various purposes, including settling installment payments of DA dues for employees and financing local bodies.

Part of the borrowed funds, approximately Rs. 1800 crores, will be allocated for paying welfare pension obligations, sourced from a Rs. 2000 crore loan acquired from the cooperative sector. This loan will be managed through a government-established company, collaborating with a consortium of cooperative societies and banks, with an interest rate set at 9.1 percent. Additionally, the government has utilized funds from cooperative societies and banks, amounting to about Rs. 24,000 crores, for investment mobilization. This marks the third instance of Kerala borrowing from cooperative banks, with loans typically extended for one year and interest paid annually.