Tamil Nadu has raised ₹5,500 crore, or nearly 24% of its ₹23,000 crore total market borrowings so far this fiscal year 2020-21, through the issue of bonds with 30-year tenures, or long-term bonds. According to data from the Reserve Bank of India (RBI), Tamil Nadu has issued more long-term bonds compared to other States.
Tamil Nadu has been raising money through the issue of bonds, known as State Development Loans (SDLs), amid the increased expenditure due to the COVID-19 pandemic and fall in revenue collections due to the lockdown.
“Many of our lenders, especially Life Insurance Corporation of India and pension funds have an appetite for long-tenure bonds, and there aren’t many in the market. It lengthens our maturity profile and spreads out repayment,” said a senior State government official. He also pointed out that the interest rates have been particularly attractive for 30-year bonds and are lower when compared to 10-year bonds.
On June 23, Tamil Nadu had raised additional ₹500 crore than was originally planned, due to attractive interest rates. The State had originally planned to raise ₹2,000 crore through the issue of ₹1,000 crore bonds, each with a tenure of 30 years and 9 years respectively. Since the cut-off interest for the 30-year bonds was 6.7% and for 9-year bonds was 6.6%, Tamil Nadu raised an additional amount of ₹250 crore in each of this securities.
The rates have come down from April. In April, Tamil Nadu had raised ₹2,000 crore through the issue of 30-year bonds at an interest rate of 7.15%. Similarly, in the same month the State had raised ₹2,000 crore through a 9-year bond at an interest of 7.5%.
