Telangana Chief Minister K Chandrasekhar Rao is a strong vocal about the increase in FRBM Limits of the State. The demand got support from several states after the Corona Crisis. FRBM Limit is the total loan allowed by a State Government in a financial year.
Atal Bihari Vajpayee Government in 2004 brought the FRBM Act to inculcate financial discipline in the states. According to the act, the maximum loans that can be availed by a State Government can not be more than 3% of its GSDP.
As all the State governments are suffering from bad finances, the Center decided to extend these limits. The States are now allowed to borrow 5% of their total GSDP. That means they can borrow 66.67% more than what they are getting now in the form of Loans.
However, there is a rider. Only a 0.5% increase is unconditional while the remaining 1.5% increase is linked to Reforms. That States will still take that. Finance Minister Nirmala Sitharaman announced this a little while ago as a part of the fifth Tranche of Economic Stimulus Package worth 20 Lakh Crore.
