The Reserve Bank of India (RBI) has declared the complete auction results of State Government Securities (State Development Loans or SDLs) with more state borrowing and elevated yields, amid liquidity pressure. The states have increased their borrowing in the fourth quarter of the financial year as RBI declares this news as they borrow at higher yields with growing liquidity concerns.
	 
	Key Points
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		Auction Size Revised: RBI raised the auction size for state bonds to ₹52,120 crore from ₹40,120 crore. This is a substantial increase over earlier auctions.
 
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		State Borrowing Highlights: Of the 13 participating states, Karnataka borrowed the maximum, amounting to ₹7,000 crore.
 
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		Yield Action: Cut-off yield on 10-year state bonds moved in a range of 7.17% to 7.20%, showing a marginal firming due to liquidity shortages and lower investor demand.
 
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		Liquidity Deficit: Net liquidity deficit was reported by the banking system to the tune of ₹2.07 trillion and has helped create a cost and lowered demand among long-term investors.
 
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		SDL Auction Framework: State governments issue SDLs as long-term debt papers to fund their development schemes. The securities are deemed risk-free and are sold by the RBI through auction under Article 293(3) of the Indian Constitution.
 
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		Market Impact: Excessive bond supply combined with weak investor appetite is likely to drive yields up by 3-4 basis points, say market experts.
 
	Sources Economic Times RBI Official Website Business Standard