States Raise Rs 383 Billion Via Loans As RBI Announces Cut-Off Yields

India’s state governments continued their borrowing program with the Reserve Bank of India (RBI) conducting auctions for state development loans. According to the RBI, 15 states mobilized Rs 383 billion, slightly below the planned Rs 398 billion. The cut-off yields highlight prevailing interest rate conditions and investor sentiment toward state debt.  

Key highlights  

• 15 states raised Rs 383 billion via loans, below the targeted Rs 398 billion.  
• Karnataka’s 5-year 6-month loan cut-off yield was set at 7.15%.  
• Karnataka’s 9-year 6-month loan cut-off yield stood at 7.48%.  
• Borrowings reflect ongoing demand for funds to support state-level infrastructure and welfare programs.  
• Lower-than-targeted borrowings suggest cautious investor participation amid current market conditions.  
• Cut-off yields indicate the cost of borrowing for states in a high-interest environment.  

Analysts note that while the borrowing program remains robust, the shortfall highlights the challenges states face in raising funds amid tight liquidity and elevated yields. The outcome underscores the importance of balancing fiscal needs with market dynamics as states continue to finance development projects.  

Sources: Reserve Bank of India, Economic Times, Business Standard, Reuters