Average borrowing cost for states up 54 bps so far this fiscal year

Since the beginning of the current fiscal year, states' average cost of borrowings has risen by 54 basis points to 7.11 per cent, even as it fell from the peak of 7.26 per cent two weeks ago.

At the weekly auctions of state debt conducted on Monday, the weighted average cost of borrowings, across states and tenures, remained elevated but flat at 7.11 per cent.

The yields on state development loans were 54 basis points higher since the start of the fiscal year, Care Ratings said in a note.

At the auctions, 12 states and Jammu & Kashmir raised Rs 20,703 crore, which was Rs 1,500 crore less than the notified amount because Andhra Pradesh and Haryana did not accept any amount in the 15-year and 10-year security, respectively.

Rajasthan accepted an additional amount of Rs 500 crore in the 5-year security. Five of the 18 states that had indicated their intent to borrow in the indicative calendar for market borrowings were not a part of the auction, the agency said.

At the aggregate level, states so far borrowed 13.4 per cent less than what they did last year. Total 29 states have raised Rs 6.19 lakh crore so far, down from Rs 7.15 lakh crore borrowed in the same period last fiscal year by 20 states.

At the aggregate level, this is lower by 22.2 per cent than what was indicated in the market borrowing calendar of states as many states have improved their revenue position this year and cut down on revenue expenditure.

The weighted average yield of the 10-year debt, which accounts for around 40 per cent of the issuances, was steady at last week's level of 7.11 per cent, while their weighted average yields, across states rose nearly 36 basis points (bps) since April.

The spread between the 10-year debt auctioned on Monday and the secondary market yield of the 10-year GSec was maintained at a week-ago level of 33 basis points.

Tamil Nadu, Maharashtra, Karnataka, UP, and West Bengal are the top five borrowing states, accounting for nearly 49 per cent of the total borrowings so far.