Borrowing by State

Draft Article 269, Draft Constitution of India 1948

(1) Subject to the provisions of this article, the executive power of a State for the time being specified in Part I of the First Schedule extends to borrowing within the territory of India upon the security of the revenues of the State within such limits, if any, as may from time to time be fixed by the Legislature of such State by law and to the giving of guarantees within such limits, if any, as may be so fixed.

(2) The Government of India may, subject to such conditions, if any, as it may think fit to impose, make loans to States for the time being specified in Part I or Part III of the First Schedule or so long as any limits fixed under the last preceding article are not exceeded, give guarantees in respect of loans raised by any such State and any sums required for the purpose of making such loans shall be charged on the revenues of India.

(3) A State for the time being specified in Part I or Part III of the First Schedule may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or its predecessor Government or in respect of which a guarantee has been given by the Government of India or by its predecessor Government. A consent under this clause may be granted subject to such conditions, if any, as the Government of India may think fit to impose.

Article 293, Constitution of India 1950

(1) Subject to the provisions of this article, the executive power of a State extends to borrowing within the territory of India upon the security of the Consolidated Fund of the State within such limits, if any, as may from time to time be fixed by the Legislature of such State by law and to the giving of guarantees within such limits, if any, as may be so fixed.

⁠(2) The Government of India may, subject to such conditions as may be laid down by or under any law made by Parliament, make loans to any State or, so long as any limits fixed under article 292 are not exceeded, give guarantees in respect of loans raised by any State, and any sums required for the purpose of making such loans shall be charged on the Consolidated Fund of India.

⁠(3) A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or by its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government.

⁠(4) A consent under clause (3) may be granted subject to such conditions, if any, as the Government of India may think fit to impose.

Draft Article 269 (Article 293, Constitution of India 1950) was debated on 10 August 1949. It stated that the executive power of the State included borrowing from the revenues of the State in accordance with laws introduced by Parliament. The Union Government may also make laws regarding loans made to States.

The Chairman of the Drafting Committee moved three amendments. One, to omit the words and figures ‘for the time being specified in Part I of the First Schedule‘. The second one to substitute the words ‘revenues of the State‘ with ‘Consolidated Fund of the State‘ in clause (1) of the Draft Article. The last amendment was to change clause (2) of the Article to “The Government of India may, subject to such conditions as may be laid down by or under any law made by Parliament, make loans to any State or, so long as any limits fixed under article 268 of this Constitution are not exceeded, give guarantees in respect of loans raised by any State, and any sums required for the purpose of making such loans shall be charged on the Consolidated Fund of India.”

All the amendments were adopted without any debate or discussion.

The Draft Article, as amended was adopted on the same day.