The Reserve Bank of India recently conducted a yield and price-based auction of state government securities (SGS). States raised a total of ₹23,600 crore against a planned ₹25,100 crore. Therefore, the auction saw a partial subscription overall, largely due to Delhi and Punjab declining certain bids.
Key Details of the State Government Securities Auction
Maharashtra emerged as the largest borrower, raising ₹9,200 crore across four tranches. Andhra Pradesh raised ₹2,000 crore, while Madhya Pradesh secured ₹3,000 crore through three separate securities. Additionally, Telangana raised ₹2,500 crore across two tenors, reflecting strong borrowing appetite from larger states.
Cut-off yields across most securities hovered between 7.62% and 8.07%. For example, Jammu and Kashmir’s 25-year paper cleared at 8.01%, while Meghalaya’s 13-year bond closed at 8.08%. Meanwhile, Goa raised ₹200 crore through an 8-year bond at a yield of 7.85%.
Delhi did not accept any bids in either of its two securities — the re-issue of 7.31% SGS 2033 and 7.75% SGS 2041. Similarly, Punjab rejected all bids for its re-issue of 7.54% Punjab SGS 2031. However, Punjab did successfully raise ₹1,000 crore through its 7.91% SGS 2041 re-issue at a cut-off yield of 8.0183%.
What This Means for State Borrowing and Bond Markets
State government securities are a critical tool for financing state budgets. As a result, auction outcomes like these directly signal market appetite for sub-sovereign Indian debt. Higher cut-off yields suggest investors are demanding a slightly better return on longer-tenor papers.
The partial rejection by Delhi and Punjab indicates these states found the prevailing market yields unattractive. Therefore, they chose not to accept bids above their preferred cost of borrowing. This is a routine but important market discipline mechanism built into RBI’s auction framework.
West Bengal raised ₹2,000 crore across three securities, with yields ranging from 7.93% to 8.07%. Additionally, Rajasthan successfully raised ₹1,900 crore through re-issues of existing SGS papers. Overall, the state government securities auction results reflect a stable but slightly elevated yield environment in India’s bond market.
Source: RBI Press Releases
