At 6.96%, borrowing costs
continue to remain high for states
states are continuing to pay higher for their market borrowings, being forced
to offer yields close to 7 per cent even as the system is awash with liquidity
amid benign interest rates, as per a report.
states which went to the market to auction state government securities on
Monday to raise Rs 8,700 crore had to offer 6.96 per cent on a weighted average
level, a paltry 3 basis points (bps) lower than that the previous weekly
cost forced Haryana to reject the entire bid for its Rs 1,000 crore auction,
while other states accepted the notified amount.
weighted average cost of borrowing across the states and tenures was 6.96 per
cent, just 3 bps lower than the auctions held last week. The decline can be
attributed to the easing of the global crude prices following the major oil
producers agreeing over the weekend to boost oil output, Care Ratings said.
cost of market borrowings for the states has been ruling over 6.9 per cent
since the third week of June. It has risen by 21 bps since mid-June and by 40
bps since April 8, the report said.
between the 10-year state bonds and the secondary market yield of new 10-year
G-secs was stable at 88 bps, same as last week. The spreads have risen from
around 50 bps in early April.
cost remains high despite the borrowings by the states so far being 13 per cent
lower on an annual basis. Twenty-three states and Delhi have raised a total of
Rs 1,86,850 crore so far this fiscal, as against Rs 2,13,776 crore borrowed
to the tentative borrowing calendar, 26 states and Delhi were to sell debt
worth Rs 2,22,550 crore as of now, but they have raised only 87 per cent of
this and that too by 23 states and Delhi.
lower quantum of market borrowings is reflective of the states' lower
expenditure following the second wave of COVID-19, which led to both revenue
generation as well revenue collection dropping.
to last year, 14 states have either borrowed less or not borrowed at all. While
Kerala, which had paid 8.96 per cent last April for a five-year money, has
borrowed as much as 33 per cent less this year, for Tamil Nadu it is 21 per
contrary, Karnataka has not raised funds from the market at all. This is
notable as last year the state had raised Rs 12,000 crore during year to date
borrowings have been higher for Uttar Pradesh (by 67 per cent), West Bengal (17
per cent), Telangana (14 per cent) and Rajasthan (6 per cent).
Nadu, Maharashtra, Rajasthan, Andhra Pradesh and Telangana have been the top
five borrowing states so far this year, accounting for around 60 per cent of
the total borrowings.