Tamil Nadu has so far raised ₹30,500 crore in the fiscal 2020-21 and has topped market borrowings among States in the country. Tamil Nadu has accounted for 17% of the borrowings done through the issue of bonds, known as state development loans, according to data from the Reserve Bank of India (RBI).
With borrowings of ₹25,500 crore, Maharashtra accounted for 14%, followed by Rajasthan and Andhra Pradesh at 17% each, as per the data.
On July 7, Tamil Nadu borrowed an additional amount of ₹500 crore rateher than the ₹2,000 crore originally planned. The State had planned to raise ₹2,000 crore through the issue of bonds of ₹1,000 each with tenures of 35 years and 3 years respectively. Tamil Nadu had an option to raise a further ₹250 crore in each of these securities, through what is known as the ‘green shoe’ option.
Tamil Nadu raised ₹1,250 crore at the interest rate of 6.63% for the 35-year bonds and ₹1,250 crore at the rate of 4.54% for the three-year bonds in the auction conducted by RBI on July 7.
The State has been borrowing additional amounts due to the drop in rates. On June 23, the State raised ₹1,250 crore through the issue of 30-year bonds at 6.7%.
Tamil Nadu has also preferred the market borrowing route for raising funds to meet the increased expenditure and falling revenue situation amid the COVID-19 pandemic. Chief Minister Edappadi K. Palaniswami recently said that with industries and businesses remaining shut, the State would sustain a shortfall in revenue of about ₹12,000-₹13,000 crore a month, as per the Finance Secretary’s projections. The State’s GST (Goods and Services Tax) collection fell 15% in June, higher than the 3% fall in national GST collections, amid the intense lockdown announced in a few districts.
The State has issued more long tenure bonds when compared to other States, and has not tapped short-terms funding avenues like Ways and Means Advances.
A senior State government official said market borrowings through long tenure bonds help in spreading out repayments and there is appetite for such bonds from Life Insurance Corporation of India and other pension funds.
So far in the current fiscal year (7 April – 7 July 2020), 23 States and 1 Union Territory have cumulatively raised ₹1.8 lakh crore via market borrowings, which is a 75% increase from the borrowings in the corresponding period of 2019-20 (₹1.03 lakh crore from April 9-July 9, 2019), according to Care Ratings.