The Tamil Nadu government has raised ₹6,560 crore through the sale of bonds, known as State Development Loans, between March 30 and April 21, according to data from the Reserve Bank of India.
The State sold the bonds with various tenures, in the backdrop of revenue collection taking a hit and an increase in expenditure owing to the lockdown. The bonds were sold through public auctions conducted by RBI.
T.N. raised ₹560 crore through sale of bonds with a tenure of 7 years and an interest rate of 7.25% on March 30. The interest rate spiked to 7.75%, when the State raised ₹2,000 crore through bonds with tenure of 10 years on April 7. A further ₹2,000 crore was raised through sale of bonds with a tenure of 9 years and an interest rate of 7.5% on April 13.
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The interest rates cooled off when the State sold bonds of ₹1,000 crore each on April 21 with tenures of three and four years respectively. The interest rate was 5.44% and 5.76% for these tranches.
On April 7, the interest rates for bonds went up because there was a rush from States to borrow. The total notified amount of bond sales was ₹37,500 crore and accepted amount was ₹32,600 crore in that auction, according to research firm Motilal Oswal. However, the rates softened as the number of bond issuances came down to ₹13,100 crore and ₹7,600 crore during the auctions on April 13 and April 21, it added.
Motilal Oswal also said that the Central government would have to relax States’ deficit and borrowing limits for FY21. Otherwise, States would have to curtail their spending at this difficult time, leading to humanitarian costs. The States and the RBI would have to manage borrowings more actively and carefully, it added.
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Sources in the State government said measures like increasing limits of Ways and Means Advances have only provided a temporary relief and what was needed was flexibility in borrowing and relaxation of fiscal deficit norms.