In an indication of liquidity issues, 13 States are found to have raised ₹12,750 crore through auction of State Government securities or State Development Loans (SDLs) on July 7. This is ₹1,250 crore more than the notified amount since Punjab, Tamil Nadu and Telangana exercised the green shoe option, Care Ratings said in a note.
So far in the current fiscal (April 7-July 7), 23 States and one UT have cumulatively raised ₹1.8 lakh crore via market borrowings, which is an increase of 75% from the borrowings in the corresponding period of 2019-20 (₹1.03 lakh crore from April 9-July 9, 2019), the ratings agency said.
As per the proposed borrowing calendar, State governments are set to raise an additional ₹1.65 lakh crore by the end of September.
“This would take the total State market borrowings to ₹3.45 lakh crore in the first two quarters of 2020-21, which would amount to a 53% increase from the borrowings undertaken in the corresponding quarters of 2019-20,” Care Ratings said.
The analysis showed that market borrowings of Tamil Nadu have been, so far, the highest in 2020-21 at ₹30,500 crore (17% of total), followed by Maharashtra ₹25,500 crore (14%), Andhra Pradesh ₹17,000 crore (9%), Rajasthan ₹17,000 crore (9%), Telangana ₹14,461 crore (8%), Kerala ₹12,430 crore (7%) and West Bengal ₹10,000 crore (6%).
Borrowing cost dips
These States together accounted for 71% of the total State market borrowing so far in 2020-21. The north-eastern States including Sikkim, Manipur, Arunachal Pradesh, Nagaland, Mizoram and Meghalaya, have together raised ₹2,205 crore (or 1.2% of total market borrowings of States), Kavita Chacko, senior economist, Care Ratings, said.
The cost of market borrowings for State governments has witnessed a decline from the start of the fiscal year. The weighted average yield of fresh State government borrowings has fallen by 149 basis points since the first auctions of the current fiscal year.However, there has been a 30 bps increase in the weighted average yield of SDLs from the last auction held on June 30, 2020, the note said.
This increase in the weighted average yield of SDLs, coupled with the decline in the weighted average yield of the Central Government borrowings, had led to a widening of the spread between Central and State government primary market yields by 66 bps since the last auction held on June 30, 2020, it added.
The decline in the cost of borrowing has been broad-based across States since April 2020. On the movement of yields of the 10-year SDLs, Maharashtra and Haryana are found to have the lowest yield at 6.54%.