Telangana Restructures Debt, Opts for Low-Cost Long-Term Borrowings

The Telangana government is shifting its borrowing strategy, favouring long-term market loans at lower interest rates over short-term, higher-cost debt to ease the state's financial burden.

Chief Minister A. Revanth Reddy stated that the previous administration had resorted to short-term borrowings with interest rates as high as 11.5%, placing significant pressure on state finances. The current government has restructured those loans and is now opting for loans with interest rates around 7.5% and tenures of 20 years or more.

In the second quarter of the current financial year (2026-27), the state plans to raise approximately ₹21,000 crore through open market borrowings. A key portion of this will be raised via securities auction conducted by the Reserve Bank of India (RBI) on June 30, with settlement on July 1. Of the ₹7,000 crore proposed in this auction, ₹2,000 crore will have a tenure exceeding 25 years, and another ₹2,000 crore will have a tenure between 16 and 20 years.

For the entire quarter, the government intends to raise around ₹5,000 crore with tenures over 25 years, and a similar amount with tenures ranging from 16 to 25 years. These auctions will follow the RBI's Benchmark Issuance Strategy, introduced on a pilot basis for nine states including Telangana. The strategy aims to provide greater transparency to investors by issuing securities in specific benchmark tenor buckets according to a pre-announced calendar.

The move is part of broader efforts to stabilise state finances and reduce the burden of interest payments on the exchequer.