- The Central government can borrow either within India or outside upon the security of the Consolidated Fund of India or can give guarantees.
- A state government can borrow within India (and not abroad) upon the security of the Consolidated Fund of the State or can give guarantees.
- The Central government can make loans to any state or give guarantees in respect of loans raised by any state.
- A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.