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States Boost Finances with Bond Reissues
9 Oct
Summary
- States increasingly rely on bond reissuances for market borrowings.
- Reissued bonds formed 65.94% of SDLs in the first half of FY27.
- RBI's Benchmark Issuance Strategy encourages this trend for transparency.
States have dramatically increased their use of reissued bonds for market borrowings, with these issuances now constituting a significant portion of their financing. In the first half of FY27, reissued State Development Loans (SDLs) represented 65.94% of the total Rs 4.98 lakh crore raised.
This surge marks a sharp acceleration, with reissuances accounting for 12.2% in FY25 and 5.73% in FY24. The Reserve Bank of India (RBI) is actively promoting its Benchmark Issuance Strategy to enhance transparency and liquidity in the state government securities market. Nine states began piloting this strategy in FY27.
This initiative is already showing impact, as 24 states opted to reissue securities in the first half of FY27, compared to only four to nine states in prior years. Experts suggest reissuance could become the primary borrowing method for states, mirroring the central government's approach.
Reissuances are expected to boost secondary-market trading volumes for state government securities. By consolidating smaller issuances, states can improve the tradability of their bonds, making them more attractive to investors and deepening the overall market.
