Additional Borrowing for National Pension System (NPS) Contribution

December 20, 2023

The Department of Expenditure, under the Ministry of Finance, has granted 22 states the approval for extra borrowing of Rs 60,876.80 crore for their contribution to the National Pension System (NPS) during the fiscal year 2023-24. This additional borrowing is permitted over and above the normal net borrowing ceiling set for the states.

Borrowing Limits and NPS Contribution

The regular net borrowing ceiling for states, fixed at 3% of the Gross State Domestic Product (GSDP) or Rs 8,59,988 crore in absolute terms for FY24, is complemented by an additional borrowing of 0.5% of GSDP linked to performance in the power sector. States are eligible to borrow Rs 1.43 lakh crore based on the power ministry’s recommendation for FY24. The extra borrowing ceiling of Rs 60,876.80 crore is specifically allocated to states for their NPS contributions.

Encouraging Participation in NPS

In a bid to encourage states to remain in the NPS, the Centre had previously offered an additional borrowing limit equivalent to the NPS contribution in FY23. This move comes in light of some states reverting to the Old Pension Scheme (OPS). The Finance Ministry shared data indicating that the total number of NPS subscribers, including the central government, state government, and corporates, stood at 1,06,69,257 as of October 31.

Utilization of Capex Loans Facility

States have the option to tap into the Rs 1.3 lakh crore 50-year interest-free capex loans facility for FY24. The Ministry of Finance has approved a capital expenditure of Rs 91,471.43 crore for 25 states, with Rs 57,090.39 crore already released to eligible states.

State Governments Reverting to OPS

Despite the encouragement for states to stay in the NPS, some state governments, including Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh, have opted to return to the Old Pension Scheme for their employees. These states have communicated their decision to the central government or the Pension Fund Regulatory and Development Authority (PFRDA), seeking withdrawal or refund of contributions.

Current NPS Landscape

As of October 31, the total number of central government pensioners under NPS was 67.95 lakh. While some states are returning to OPS, the government continues to support NPS contributions, emphasizing the festive offer for extra borrowing to facilitate states’ participation in the NPS.

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