Centre Disburses ₹40,000 Crore in Interest-Free Capex Loans to States in FY26

Over ₹40,000 crore in interest-free capital expenditure (capex) loans have been made available to states by the Indian central bank in the current fiscal year (FY26), hastening reform and development projects throughout the country. These 50-year loans have been approved for a total of ₹60,000 crore thus far, approaching an annual goal of ₹1.5 lakh crore.  By September 2025, disbursements are expected to total ₹75,000 crore.

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Loans Tied to Reform-Driven Targets

From the ₹1.5 lakh crore total capex allocation, guidance and conditionalities have been issued for ₹1.4 lakh crore. Nearly two-thirds of these loans are linked to governance and financial reforms, including:

• Establishing municipal cadres
• Launching an integrated property tax portal
• Implementing urban land and planning reforms
• Encouraging states to ramp up their capital expenditure
• Facilitating both urban and rural infrastructure development

SASCI's Evolution as a Reform Incentive

The Scheme for Special Assistance to States for Capital Investment (SASCI), introduced in FY21 during the COVID-19 crisis with an initial pool of ₹12,000 crore, has expanded significantly. By FY25, its ceiling rose to ₹1.5 lakh crore, with about half of the funds conditional on reforms. Government officials affirm that states are now adequately primed to leverage this scheme and meet FY26 fiscal goals.

Green Light for Digital Agriculture

For the first time, the Centre has set aside ₹6,000 crore exclusively for digital agriculture projects. This includes the creation and upkeep of a farmer registry aligned with existing land records and conducting a digital crop survey to standardise data and strengthen crop monitoring.

Incentives for Financial Efficiency

Another ₹6,000 crore is reserved to help states enhance financial efficiency. Eligible states must:

• Integrate 29 centrally sponsored schemes into the SNA SPARSH platform for real-time fund disbursal
• Implement Aadhaar-linked Direct Benefit Transfer (DBT) systems with the RBI and NPCI to streamline welfare payments

Conclusion

The Centre’s interest-free capex loan programme in FY26 is not only delivering rapid disbursals to states, but also serving as an engine for transformative reforms. With significant allocations tied to digital agriculture, financial governance, and urban planning, India’s capex scheme is emerging as a powerful lever for inclusive and transparent growth.