Govt eases borrowing consent norms for states

The finance ministry on Thursday said states will now be allowed to seek consent for open market borrowings only once in nine months, a relaxation of existing norms wherein they had to seek permission for every quarter.

"In order to bring in the transparency and predictability in the open market borrowings (OMBs) by the states, the central government has decided to simplify the consent mechanism for OMBs under Article 293 (3) of the Constitution," the ministry said in an official statement.

"The simplified mechanism would allow the states to prepare their borrowing calendar for the first nine months and seek one-time consent for raising OMBs during the first nine months of the financial year," it stated.

Till now, states were required to obtain quarterly consent from the Centre for raising OMBs within the net borrowing ceiling fixed for each one according to the formula prescribed by the Fourteenth Finance Commission.

According to the new mechanism, once the first three quarters are over, consent for the first two months of the last quarter will be given based on the assessment of details of borrowings and repayment actuals of three quarters and estimates of the fourth quarter

"The consent for the last month i.e. March will be given based on the re-assessment of actual borrowings for the first 11 months by the states," the ministry said.

Thus, the simplified procedure will ensure that consent under Article 293(3) is issued only on three occasions during the year, one in the month of April for the first nine months after fixation of borrowing ceilings, second in the month of December for the first two months of the fourth quarter and last in the month of March after the assessment of actual borrowings by the states.