More Stories

Informist, Tuesday, Oct. 7, 2025

 

--Fin min official: Disbursed INR 500 bln as capex loans to states Apr-Sept

--Fin min official: Approved INR 700 bln as capex loans to states Apr-Sept

--CONTEXT: Govt earmarked INR 1.5 tln as capex loans to states for FY26

 

 

By Priyasmita Dutta 

 

NEW DELHI – The Centre has released INR 500 billion to states in the first six months of 2025-26 (Apr-Mar) as part of the Scheme for Special Assistance to States for Capital Expenditure in the form of 50-year interest-free loans, a senior finance ministry official said Tuesday. In the Budget for FY26, the government had earmarked INR 1.50 trillion for the flagship scheme. 

 

The official said that states' spending appetite is gradually picking up pace, with greater push on capital expenditure expected in the second half of the fiscal. "Capex spending is typically skewed to the second half of the year, so the demand from states will be higher during Oct-Mar," the official told Informist. The Centre is confident that states will absorb the entire INR 1.50 trillion allocated for FY26 as capital spending gathers further momentum, the official added. 

 

So far this year, the Centre has approved loans worth INR 700 billion, the official said. The allocation for states' loans is part of the government's total capital expenditure target of INR 11.21 trillion for FY26. The majority of funds released so far is from the "untied" portion of the scheme, the official added.

 

The finance ministry has issued guidelines for the release of INR 1.40 trillion of the total INR 1.50 trillion of the 50-year interest-free loans to states and Union territories. Of these, loans worth INR 570 billion, or 38%, are "untied". Of the "tied" or conditional part, the government has issued modalities for the release of INR 830 billion, Informist had reported in April.

 

 

Typically, the interest-free loans to states for capital investment have multiple parts, with a majority of it being untied or simply based on the 15th Finance Commission's recommendation for states' share in central taxes and the other parts are conditional on fulfilment of reforms and infrastructure development. Since FY25, however, the finance ministry has cut down the "untied" portion of the scheme.

 

Out of the INR 570 billion "untied" portion, the first instalment of 66% is released on meeting mandatory conditions, while the second instalment of 34% is released after 75% of the fund utilisation from the first instalment and refund of central share in state nodal agency account of all centrally sponsored schemes migrated to Single Nodal Agency SPARSH by Mar. 31, 2025, according to the norms set by the Centre.

 

Within the INR 830 billion allocation for "tied" part of the scheme for the current year, INR 150 billion is available to states that achieved a 10% on-year growth in capital expenditure in FY25 and a growth rate of over 10% year on year in Apr-Dec. In FY25, the Centre had kept INR 250 billion for the achievement of a state's own capital expenditure.

 

The Centre has also earmarked another INR 130 billion for states' governance reforms, finance reforms and urban planning reforms. Under governance reforms, states have to build municipal cadre and digital interventions for improved governance. Under finance reforms, states have to integrate property tax portal with unique identification document and diversify revenue sources. Under urban planning reforms, states have to undertake a host of development projects under specific sectors, according to the document shared with states.   

 

First launched in the Budget for FY22, the scheme for special assistance to states to carry out capital investment is in line with the Narendra Modi government's thrust on capital expenditure to drive economic growth. In the past five years, the government has increased the Centre's capital expenditure by more than three times. In FY25, the government ended up releasing just short of INR 1.50 trillion to states for capex loans, much higher than the revised estimate of INR 1.25 trillion and close to the original target set by the government.  End

 

Edited by Akul Nishant Akhoury

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.