Telangana’s financial strain sharpened this week as the state government placed an indent with the Reserve Bank of India to borrow ₹5,000 crore through fresh bond auctions. Officials said the move is part of an urgent loan-swapping strategy aimed at replacing the high-interest borrowings inherited from the previous BRS government. With just four months left in the fiscal year, this auction alone pushes the state dangerously close to the borrowing ceiling fixed by the Union Finance Ministry.
This borrowing will push the state beyond the ₹54,009-crore ceiling set by the Union finance ministry for 2025-26, even though the fiscal year still has four months to go.
Borrowing Surge in November
By the end of October, the state had already tapped ₹50,541 crore of its borrowing limit. In November alone, Telangana raised ₹4,100 crore through three separate auctions. With the upcoming ₹5,000-crore auction, the monthly total climbs to ₹9,100 crore. The government had earlier planned a steady borrowing schedule for the October–December quarter, but the latest indent shifts this strategy with a single, large auction on November 25.
Why the Government Is Swapping Loans
Officials say the aggressive borrowing is part of an urgent strategy to replace expensive loans associated with mega infrastructure projects like the Kaleshwaram Lift Irrigation Scheme.
Out of the ₹48,000 crore borrowed in the first half of the fiscal year, a massive ₹32,303 crore went solely towards servicing Kaleshwaram-linked debts. This included ₹11,447 crore in interest and ₹20,856 crore in principal repayments. Several of these loans were contracted at interest rates as high as 12 percent.
Centre Clears Restructuring After Revanth Reddy’s Push
Following repeated representations from Chief Minister A. Revanth Reddy, the Union government approved the restructuring of ₹25,000 crore worth of high-cost loans through the RBI in August. The new loans carry significantly lower interest rates between 7 and 7.5 percent. This restructuring has eased the state’s debt-servicing burden and created much-needed fiscal breathing room. The government had originally projected borrowings of ₹64,539 crore for 2025-26, though this was later restricted to ₹54,009 crore to comply with FRBM norms.
Is Bankruptcy Inevitable?
Despite the alarming indicators, officials maintain that Telangana is not in default territory. The state continues to meet payments but operates with little breathing room. Revenue-boosting measures, central support, and rationalised spending may steady the ship, though recovery will demand discipline across political lines. Telangana’s financial challenge is real, and the ₹5,000-crore RBI borrowing underscores how urgently the state is trying to correct its course. This is a temporary relief that will depend on how effectively the government reins in inherited burdens while delivering on its commitments.
