The Union Cabinet has approved providing a one-time loan of ₹45,000 crore from the National Small Savings Fund (NSSF) to the Food Corporation of India (FCI).
At present FCI takes working capital loans through a Cash Credit Limit (CCL) and Short Term Loan (STL) at interest rates between 10.01 per cent and 9.40 per cent.
Loans from the NSSF will be cheaper as it charges 8.8 per cent annual interest.
State governments were allowed to borrow against the deposits from their territory to the NSSF prior to the Cabinet decision.
For those states still allowed, Arunachal Pradesh shall be given loans to the tune of 100 per cent of NSSF collections within its territory, whereas Delhi, Kerala and Madhya Pradesh shall be provided 50 per cent of collections.
Further, once the states are excluded from NSSF investments, the investible funds of NSSF with the government will increase and help reduce market borrowings.