States raise a record ₹50,206 crore through auction of government securities

As many as 17 states tapped financial markets on Tuesday to raise a total of ₹50,206 crore through auction of state government securities, marking the largest such weekly borrowing ever, according to market experts.

In March 2023, 16 states had raised ₹41,213.72 crore through the auction of the State Development Loans (SDL) conducted by the Reserve Bank of India (RBI).

The funds raised on Tuesday exceeded the indicative calendar amount of ₹27, 810 crore set for the period, according to RBI data.

The final weekly auction of state government securities for the quarter ending on 31 March 2024 will take place on 26 March.

Experts have noted that over the past two fiscal years, including the current one, there has been a trend where state government borrowings predominantly occur in the latter half of the fiscal year. This trend diverges from the schedule suggested in the RBI's indicative borrowing calendar, enabling states to garner substantial funds during the second half of the year.

"A pick-up in state borrowings during the second half of the year can be attributed to the GST inflows and interest-free loans provided by the government, which came in during the first half of the year," said Venkatakrishnan Srinivasan, Founder & Managing Partner, Rockfort Fincap LLP.

"This could also help the centre's borrowing plan, which is typically done during the first half of the year," Srinivasan added.

During Tuesday's auction, Karnataka and Tamil Nadu each raised ₹6,000 crore, West Bengal secured ₹5,000 crore, and Uttar Pradesh achieved ₹8,000 crore in funds. The securities issued have maturities ranging from 6 to 40 years, with yields between 7.45% and 7.50%.

For the fourth quarter of fiscal year 2024, states aim to borrow a total of ₹4.10 trillion, a significant increase from the ₹2.37 trillion raised in the preceding quarter.