State government borrowings dip sharply in April

New Delhi: State government borrowings through securities declined sharply to ₹53,870 crore in April from ₹2.25 trillion in March, according to the latest data from the Reserve Bank of India (RBI), likely deferring costlier loans to suit spending.

On Tuesday, 10 states raised ₹24,700 crore through auctions of State Development Loans (SDLs), the largest tranche during the month. Earlier in April, states had mobilized funds in four smaller tranches of ₹11,800 crore, ₹3,500 crore, ₹3,000 crore and ₹10,870 crore.

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SDLs are bonds issued by state governments to finance budgetary needs and fund development projects across infrastructure, health, education and other public services.

These securities are auctioned by the RBI and are a key tool for states to raise resources from the market.

The indicative amount for state borrowings in the first quarter of FY26 (April–June 2025) is pegged at ₹2.73 trillion, slightly higher than the ₹2.54 trillion estimated in the same period last year.

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Experts note a growing trend among states to defer the bulk of their market borrowings to the second half of the financial year, giving them greater flexibility in managing cash flows and project timelines.

States typically rely on low-cost or interest-free funds in the first half of the fiscal year—such as their tax revenues, central tax devolution, GST compensation, and interest-free loans from the Centre—before turning to market borrowings when these sources begin to dry up, said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP.

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"Many state infrastructure projects—from roads and bridges to water supply systems—gain real momentum only after the monsoon season ends. Naturally, this means higher spending (and borrowing) needs in H2," he said.

"Also, to ensure that the bond market isn’t flooded with too much borrowing at once, the central government has been frontloading its bond issues in the first half, leaving more space in the second half—especially in Q4—for states to borrow without driving up interest costs. It’s a coordinated move that benefits both sides," he added.

At Tuesday’s auction, Maharashtra led with ₹6,500 crore, followed by Rajasthan ( ₹4,500 crore), Punjab ( ₹2,500 crore), Uttar Pradesh ( ₹3,000 crore) and Kerala ( ₹2,000 crore).

Smaller amounts were raised by Telangana ( ₹1,400 crore), Himachal Pradesh ( ₹1,300 crore), Tamil Nadu and Haryana ( ₹1,000 crore each), Uttarakhand ( ₹1,000 crore) and Tripura ( ₹500 crore).