Key Points
- Seven states to raise ₹16,750 crore through bond auction on 22 September
- Maharashtra leads with ₹5,000 crore followed by Rajasthan at ₹4,400 crore
- Retail investors can participate through RBI Retail Direct with ₹10,000 minimum
Seven state governments will raise a combined ₹16,750 crore through an auction of state development loans on 22 September, the Reserve Bank of India announced on Friday (18 September). Maharashtra will lead the borrowing at ₹5,000 crore, followed by Rajasthan at ₹4,400 crore and Andhra Pradesh at ₹2,600 crore.
Gujarat and Punjab will raise ₹2,000 crore each, while Jammu and Kashmir has proposed borrowings of ₹600 crore and Goa ₹150 crore. The auction will be conducted through E-Kuber, the RBI‘s core banking platform that handles government securities transactions, with both competitive and non-competitive bidding facilities available to eligible investors.
State development loans are debt instruments issued by state governments to meet their fiscal requirements. Banks, insurance companies, mutual funds and retail investors purchase these securities, which offer fixed interest payments over periods ranging from five to 30 years.
The securities also qualify as eligible investments under the statutory liquidity ratio, meaning banks can count them towards the mandatory percentage of deposits they must hold in approved securities under the Banking Regulation Act, 1949.
State borrowing
Maharashtra will raise ₹1,000 crore through the re-issue of its 7.09 per cent securities maturing in 2031, ₹2,400 crore through 7.63 per cent securities maturing in 2039 and ₹1,600 crore through 7.70 per cent securities maturing in 2049. Re-issued securities carry the same coupon rate, the fixed annual interest percentage paid to bondholders, as the original issuance.
Rajasthan will borrow ₹2,200 crore each through the re-issue of securities maturing in 2044 and 2053. Andhra Pradesh will raise ₹1,000 crore through securities maturing in 2039 and another ₹1,600 crore through securities maturing in 2051.
Gujarat’s borrowing will be divided equally between securities maturing in 2036 and 2041, with ₹1,000 crore allocated to each tranche. Punjab will issue fresh securities with maturities of five and 15 years to raise ₹500 crore and ₹1,500 crore respectively. Goa will raise ₹150 crore through a new 15-year security.
By the numbers
Key figures from this story- ₹16,750 crore
- Total amount seven states will raise
- ₹5,000 crore
- Maharashtra's borrowing, highest among states
- ₹10,000
- Minimum investment for retail investors
For newly issued securities from Punjab and Goa, the interest rates will be determined at the auction based on the bids received. Institutional investors submit competitive bids specifying the yield at which they are willing to purchase the securities, and the RBI accepts bids starting from the lowest yield until the notified amount is fully subscribed.
Retail participation
The RBI said up to 10 per cent of the notified amount of each security would be available to eligible individuals and institutions under the non-competitive bidding facility. This mechanism allows smaller investors to participate without needing to specify a yield, instead accepting the weighted average yield that emerges from the competitive auction.
Individual investors can participate through the RBI’s Retail Direct portal, launched in November 2021 to provide direct access to government securities markets. The scheme allows citizens to open gilt accounts with the central bank and purchase central and state government securities without intermediaries.
Under the scheme, a single non-competitive bid cannot exceed one per cent of the notified amount of the respective security. The minimum investment amount is ₹10,000, with additional investments permitted in multiples of ₹10,000.
Competitive bids must be submitted between 10.30am and 11.30am IST on 22 September, while non-competitive bids will be accepted between 10.30am and 11am IST. The RBI will determine the cutoff yield, the maximum yield at which bids will be accepted, based on market conditions and the bids received.
Auction results will be announced on 22 September, and successful bidders will be required to make payments during banking hours on 23 September. The settlement follows the T+1 cycle standard for government securities auctions, where T represents the trade date.
State development loans typically offer yields slightly higher than central government securities of comparable maturity, showing the marginally higher credit risk associated with state governments. However, they carry implicit sovereign backing and have historically recorded no defaults, making them a relatively safe fixed-income investment for institutional and retail portfolios.
Your Questions, Answered
Which states are participating in the bond auction on 22 September?
Maharashtra, Rajasthan, Andhra Pradesh, Gujarat, Punjab, Jammu and Kashmir and Goa will participate in the auction, raising a combined ₹16,750 crore.
How can retail investors participate in state bond auctions?
Retail investors can participate through the RBI's Retail Direct portal using non-competitive bidding. The minimum investment is ₹10,000 and up to 10 per cent of each security is reserved for non-competitive bids.
What is the difference between competitive and non-competitive bidding?
Competitive bidders specify the yield at which they will purchase securities. Non-competitive bidders accept the weighted average yield from the competitive auction without specifying a price.
When will auction results be announced and payments due?
Results will be announced on 22 September. Successful bidders must make payments during banking hours on 23 September under the T+1 settlement cycle.
