California will pay no fees and 3 percent interest on a $1.5 billion loan from JP Morgan Chase & Co that will provide the state with money to pay its recently issued IOUs, State Treasurer Bill Lockyer's office said on Thursday.

The government of the most populous U.S. state issued the IOUs to conserve dwindling cash during its recent budget crisis. California will repay the loan from JP Morgan Chase after its planned sale of revenue anticipation notes next month, Lockyer's office said in a statement.