Tamil Nadu has raised ₹2,000 crore through the issue of bonds known as State Development Loans (SDLs) with a tenure of 30 years, at an interest rate of 7.15%, according to data from the Reserve Bank of India. With this, the State has so far raised ₹8,560 crore (₹8,000 crore this month alone) by selling bonds to meet the increased expenditure arising out of the COVID-19 outbreak.
Earlier this month, the Centre allowed states to raise ₹3.2 lakh crore in net market borrowings during the first nine months of the current financial year, as a result of which Tamil Nadu will be able to borrow ₹28,880 crore.
“Interestingly, while several States have issued shorter tenor SDLs of 1-3 years, Tamil Nadu reissued a 30-year SDL on April 28, 2020 and raised ₹2,000 crore at an attractive cut -off of 7.15%,” Jayanta Roy, senior vice-president at ICRA, a research firm, said.
“The 10-year SDL cut-offs eased by around 100 basis points in the auction held on April 28, 2020, relative to cut-offs in the first week of the same month. This partly reflects the lower supply of ₹7,000 crore in the auction held on April 28, 2020 than the initially indicated amount of ₹11,100 crore by the states to the RBI,” he added.
The steps announced by RBI, including the substantial enhancement in the Ways and Means Advances limits of states, also appears to have contributed in cooling off the SDL interest rates, Mr. Roy said.
“Tamil Nadu has made a re-issuance of the 30-year bond, which has demand. The interest rates cannot be compared with those of other States as the tenure is different,” Madan Sabnavis chief economist CARE Ratings said.
