With all states barring Maharashtra and West Bengal agreeing to exchange high cost interest bearing bonds with softer loans, the Centre will start the debt swap very soon.

"It could be very soon, this week or this month as 26 states have agreed to the Centre's debt swap proposal," finance secretary S Narayan told reporters.

Maharashtra and West Bengal are the two states, which have not agreed, and they account for nearly 40 per cent of the loans to states, mostly from small savings accruals.

In the face of the severe debt burden of states at Rs 5,80,000 crore (Rs 5, 800 billion), the Centre proposed the debt swap at the chief ministers' conference convened last year to find ways to overcome the difficult fiscal situation.

Maharashtra and West Bengal have not agreed so far as they want the proposal to be improved upon further considering the magnitude of the debt.

Last year, the Centre agreed to swap debts worth Rs 25,000 crore (Rs 250 billion) -- Rs 15,000 crore (Rs 150 billion) on accont of small savings and the remaining for market borrowings by states.

The Centre decided to exchange high cost debts of states with low cost securities worth Rs 1,10,000 crore (Rs 1,100 billion) during the next four years.

Although states welcomed the move, some of them asked the Centre to swap more debts as their interest outgo was still as high as Rs 69,000 crore (Rs 690 billion).