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Informist, Monday, Apr. 6, 2026

 

MUMBAI – ICRA sees gross market borrowing by state governments in 2026-27 (Apr-Mar) at INR 13.4 trillion-INR 14.0 trillion, up from INR 12.77 trillion in FY26. The net state bond issuance is likely to be between INR 9.2 trillion and INR 9.7 trillion in FY27, up from INR 9.0 trillion in the previous fiscal, the rating agency said in a report on Monday.

 

The estimate is based on states using 80-85% of their net borrowing limit approved by the Centre while rolling over INR 4.2 trillion of redemptions due, the report said. The central government, accepting the recommendation of the 16th Finance Commission, has pegged the net borrowing limit for the state government at 3% of the gross state domestic product for the period of FY27-31.

 

"A reduction in the time taken by states in submitting the information sought by the Government of India (GoI) for determining the states' borrowing limit for the year and subsequent vetting, approval and communication of the same by the GoI to the states, could narrow the gap between the actual and indicated SGS issuance in Q1 FY2027 (Apr-Jun), among other factors," ICRA said. 

 

Late Thursday, the RBI said states would borrow INR 2.55 trillion through bonds in the June quarter. The central bank has introduced a Benchmark Issuance Strategy on a pilot basis, with nine states indicating the tenures they want to issue. For the strategy to succeed, the ratings agency said it is important for these nine states to stick to the indicated amount in the calendar. 

 

The actual state bond issuance has lagged sharply behind the indicative amount in prior years, especially in the first quarter of the financial year. States raised INR 2.01 trillion through bonds on a gross basis in Apr-Jun last year, against the indicated INR 2.73 trillion. This year, Karnataka may again not issue bonds in the June quarter despite indicating an INR 53 billion supply, as it has skipped borrowing in the first quarter since FY22, ICRA said.

 

The increase in gross indicated supply comes from higher bond issuances by West Bengal, Bihar, and Uttar Pradesh, with borrowing increasing by INR 140 billion, INR 120 billion, and INR 108 billion, respectively. Haryana, Himachal Pradesh, Punjab, and Rajasthan are scheduled to borrow less than a year ago. Net supply of state bonds will rise by 48% on-year to INR 1.8 trillion in the June quarter, as redemptions have decreased on-year, the ratings agency said. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Janwee Prajapati and Aaryan Khanna

Edited by Saji George Titus

 

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