States urged to speed up capex loan utilisation

The Department of Expenditure has asked states to accelerate the use of funds under the Centre’s ₹2 lakh crore interest-free capital investment loan programme. In letters sent during the first week of October, the department flagged slow utilisation, with several states yet to draw available funds or submit utilisation certificates.

The Centre had released around ₹51,000 crore under the Scheme for Special Assistance to States for Capital Investment as of 1 Oct 2026 and sanctioned loans worth ₹67,000 crore. Releases represented about 26% of allocation, while actual utilisation remained lower, according to The Economic Times. The department has directed officials to contact states, collect pending utilisation certificates and speed up approvals.

Key points:

• The programme carries a total allocation of ₹2 lakh crore for the year and provides interest-free loans for capital expenditure.

• Sanctions of ₹67,000 crore exceeded releases of ₹51,000 crore as of 1 Oct 2026, highlighting a gap between approvals and fund deployment.

• States that have not drawn funds or filed utilisation certificates face additional administrative follow-up from the Department of Expenditure.

Faster deployment would improve the flow of public spending into roads, urban infrastructure and other state-level capital projects 🏗️. That creates a potential near-term operating backdrop for construction, engineering and capital-goods companies, although the report did not identify specific corporate beneficiaries or quantify project-level orders. The main market signal is the pace at which sanctioned funds convert into actual spending rather than the size of the headline allocation alone.

For infrastructure-linked sectors, traders will watch fresh releases, approval timelines and state-wise utilisation certificates. A widening gap between sanctioned and released amounts would indicate continued execution delays, while higher releases and visible project awards would provide evidence that the programme is translating into activity. The update also matters for public finances, as interest-free borrowing gives states room to fund capital expenditure without adding interest costs to the programme.

The policy push follows concern that slow deployment could hold back state-level capital expenditure. Further directions from the Department of Expenditure, revised utilisation data and announcements of projects funded through the scheme are the next factual markers for the infrastructure and construction segments

Source: The Economic Times, 13 Oct 2026

Not investment advice. For informational purposes only.