State to set up Guarantee Redemption Fund
The guidelines issued by the Union Finance Ministry regarding borrowings for 2025-26 says that if the investment recommended by the Reserve Bank is not made in the GRF by April 1, 2025, an equivalent amount or 0.25% of the Gross State Domestic Product (GSDP), whichever is lower, will be deducted from the total borrowing limit of the State for 2025-26. This is the first time that the formation of GRF has been included in the criteria for fixing the borrowing limit of the states.
As a State facing a revenue deficit, it would have been possible to invest in the GRF only through borrowals. The cabinet meeting decided to issue a notification to set up a GRF to avoid a reduction in the State's credit availability this financial year as per the new guidelines, said a press release from the Chief Minister's office.
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State to set up Guarantee Redemption Fund
The State Cabinet on Wednesday approved the plan to set up a Guarantee Redemption Fund (GRF). The Union government had proposed the setting up of the fund as a buffer to overcome the risks that may arise due to the guarantee provided by the States to the public sector undertakings. The investment in this fund has to be increased to 5% of the outstanding guarantee in 5 years. The guidelines issued by the Union Finance Ministry regarding borrowings for 2025-26 says that if the investment recommended by the Reserve Bank is not made in the GRF by April 1, 2025, an equivalent amount or 0.25% of the Gross State Domestic Product (GSDP), whichever is lower, will be deducted from the total borrowing limit of the State for 2025-26. This is the first time that the formation of GRF has been included in the criteria for fixing the borrowing limit of the states. As a State facing a revenue deficit, it would have been possible to invest in the GRF only through borrowals. The cabinet meeting decided to issue a notification to set up a GRF to avoid a reduction in the State's credit availability this financial year as per the new guidelines, said a press release from the Chief Minister's office.
