| NBC It is a fiscal policy tool imposed by the central government to regulate the borrowing capacity of state governments. It aims to ensure fiscal discipline among states. NBC encompasses all forms of borrowing Loans from financial institutions Open market borrowings Liabilities from the public accounts of the states |
- The central government imposed a Net Borrowing Ceiling (NBC) on Kerala in 2023, capping borrowing at 3% of the projected GSDP for FY2023-24.
- The NBC includes all borrowing avenues and extends to State-owned enterprises to prevent circumvention of limits.
- Key Provisions of Borrowing Powers: Part XII of the Constitution deals with the borrowing powers of the Centre and States.
- Article 292: Central government borrows upon the security of the Consolidated Fund of India.
- Article 293: State governments borrow within India on the security of their Consolidated Fund, subject to borrowing limits set by Parliament and State legislatures.
- States require central consent to borrow if previous loans or guarantees from the Centre remain unpaid.
- Central consent may come with conditions, giving the Centre broad discretion.
Dig Deeper: Read about relevant provisions of the FRBM Act.
