States, Union Territories plans to borrow up to Rs 2.5 trn in Q1FY25

States and Union Territories (UTs) plan to borrow up to Rs 2.5 trillion through state government securities in the first quarter of the upcoming financial year, the Reserve Bank of India said in a release on Thursday. The indicative borrowing for the quarter was marginally higher than expectations, said market participants.

“The market estimate was around Rs 2.2 trillion,” a dealer at a state-owned bank said. “However, they normally borrow only 60-70 per cent of the calendar amount in the first quarter,” he said.

In the first quarter of the financial year 2023-2024, states had borrowed 84 per cent of the notified amount of Rs 1.9 trillion.

“Our estimate was between Rs 2 trillion to Rs 2.2 trillion. It is a bit on the higher side. But this shouldn’t have any major impact as the demand is good for the SDLs (state development loans),” said a dealer at another state-owned bank. “They usually borrow heavily only in the last quarter,” he added.

During the January-March quarter, states aimed to issue bonds worth Rs 4.1 trillion. Eighteen states borrowed a record Rs 55,032 crore at the last state loan auction for the current financial year on Tuesday, against the notified amount of Rs 60,032 crore. The notified amount was significantly higher than the calendar amount of Rs 29,399 crore. The cut-off yield on 10-year papers was set in the range between 7.44 per cent and 7.7.47 per cent on Tuesday, against 7.44 per cent and 7.50 per cent at the previous auction.