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Govt allows states to seek direct external borrowings

Direct loans can be sought for infractructure projects over Rs 5,000 cr

Press Trust of India  |  New Delhi 

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State entities can now directly seek from bilateral overseas lending agencies for infrastructure projects of over Rs 5,000 crore, the Union Ministry said on Thursday.

Earlier, the rules did not permit direct borrowings by the state entities from external agencies. Only, the central could have raised external on behalf of state governments.

"It has been decided to allow direct borrowing by financially sound state entities from bilateral ODA (Official Development Assistance) partners, based on State Guarantee and of counter guarantee" subject to certain conditions.

State entities will include any 'authority', public sector undertaking or organisation of the state.

The guidelines prescribe that can be obtained by state entities having an annual of more than Rs 1,000 crore in the three previous years for infrastructure projects of over Rs 5,000 crore.

"The project should have regular stream -- the revenues to be generated from the project should be enough for repayment of principal amount and interest," the ministry said.

The revenues from the project would be escrowed to the extent of payment of principal and interest from time to time.

The relaxation is aimed at funding major infrastructure projects, social sector projects and building institutional capacities.

It would help state agencies in implementing projects having huge financial requirements which otherwise would have been faced fund crunch despite being viable.

First Published: Thu, May 18 2017. 17:59 IST