Pointing out that the debt swap scheme has helped states to reduce their interest burden, the Reserve Bank of India on Monday said additional market borrowings have financed around 61 per cent of Rs 60,368 crore (Rs 603.68 billion) of total debt swapped at less than half the earlier cost.
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"As per the interim budget 2004-05 of the Union government, the total debt swap was placed at Rs 46,602 crore (Rs 466.02 billion) in revised estimates for FY04 and RBI records indicated that the additional market borrowings under the DSS amounted to Rs 26,623 crore (Rs 266.23 billion) during 2003-04", the central bank said in its report on state finances released in Mumbai on Monday.
"Thus, so far, of the total debt swapped amounting to Rs 60,368 crore (Rs 603.68 billion), around 61 per cent have been financed through additional market borrowings at interest rates below 6.5 per cent (at less than half of the earlier cost)," it added.
The remaining loans have been financed through issue of special securities to the National Small Savings Fund at interest rates fixed at 9.5 per cent (at less than three-fourth of the earlier cost), RBI said.
The debt swap scheme is debt neutral and it only results in change in level and composition of capital expenditure and receipts.
"Over a period of time, savings by way of lower interest payments are expected to reduce the pressure on the states' revenue account and thereby on their overall borrowing requirement," RBI added.
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