State Borrowing Round: RBI Sets Cut-Offs As Seven States Raise Funds

State development loans (SDLs) are a key instrument for financing infrastructure and welfare projects. Today’s auction saw strong participation, with yields reflecting current market conditions and investor confidence in state-backed securities.  

Borrowing Details  

Andhra Pradesh secured funds through a 12-year loan at 7.96% and a 25-year loan at 8.07%. Rajasthan raised capital via a 17-year loan at 7.97% and a 31-year loan at 8.06%. Himachal Pradesh, Meghalaya, and Punjab borrowed at cut-offs of 7.81%, 7.84%, and 7.91% respectively.  

Market Context  

The successful auction highlights the steady demand for SDLs, which remain attractive to investors due to their sovereign backing. Analysts note that yields are broadly aligned with current interest rate expectations, reflecting stable borrowing costs for states despite fiscal pressures.  

Auction Highlights  

• Seven states raised ₹181.59 billion via SDLs  
• Borrowing matched targeted amount exactly  
• Andhra Pradesh cut-off at 7.96% (12-yr), 8.07% (25-yr)  
• Rajasthan cut-off at 7.97% (17-yr), 8.06% (31-yr)  
• Himachal Pradesh, Meghalaya, Punjab cut-offs between 7.81%–7.91%  

Sources: Reuters, Economic Times, Business Standard, Mint