• The Tamil Nadu government plans to borrow ₹45,000 crore in the fourth quarter of fiscal 2024-2025, according to report released by the Reserve Bank of India (RBI).
• States including Tamil Nadu raise funds through the issuance of bonds known as State Development Loans (SDLs).

SDLs

• The auction for the bonds is conducted by RBI. The bonds are issued for various tenures, and States have to repay the principal with interest on maturity.

Borrowing ceiling

• The Union government fixes the borrowing ceiling for States. The borrowing ceiling has been 3% of the projected Gross State Domestic Product (GSDP) from 2023-24.
• An additional borrowing of 0.5% of GSDP for a period of four years, from 2021-22 to 2024-25, can be made on fulfillment of power sector reforms.
• SDLs form a major part of Tamil Nadu’s outstanding liabilities.
• According to the CAG, the total liabilities of the State government typically constituted internal debt of the State (market loans, ways and means advances from RBI, special securities issued to National Small Savings Fund and loans from financial institutions, among others), and loans and advances from the Central government and Public Account Liabilities.