Tamil Nadu’s borrowing cost came down in the recent bond auction. Also, the State has borrowed lesser than the indicated amount so far in the fourth quarter of the financial year 2022.
On Tuesday, Tamil Nadu raised ₹1,000 crore through the issue of bond, called State Development Loans (SDLs). The bond, with a tenure of 25 years, had a yield of 7.13%. The yield was lower than the 7.22% on January 4, when the State raised ₹1,000 crore through the re-issue of SDLs with a tenure ending 2046.
Tamil Nadu raised ₹1,000 crore through SDLs at an attractive yield of 7.13%, compared with the 15-year issuance by Karnataka and Punjab at 7.12% each at Tuesday’s auction, ratings firm ICRA pointed out.
Overall, the weighted average cut-off of the aggregate SDL issuance by States softened by 13 bps to 7.11%, compared with 7.24% last Tuesday, it added.
ICRA attributed the fall in yields to several factors, including the Reserve Bank of India keeping the reverse repo rate unchanged, the dovish tone of the monetary policy and the cancellation of Government of India securities auction initially scheduled for February 18.
Tamil Nadu borrowed ₹1,000 crore on February 15, which is lesser than ₹2,000 crore it had indicated. The State has borrowed ₹7,400 crore between January 4 and February 15, which is lesser than ₹13,000 crore indicated for the period as per the borrowing schedule released by the RBI.
The borrowing may be lesser due to Tamil Nadu’s improving revenue position and a higher devolution of taxes from the Centre.
Tamil Nadu’s total revenue receipts so far in the fiscal 2021-22 (till December) stood at ₹1,33,872.67 crore, with the State’s Share of Union Taxes standing at ₹18,368.14 crore. However, amid a higher expenditure, the State continues to be in revenue deficit and fiscal deficit. As in December, Tamil Nadu’s revenue deficit is at ₹18,395.92 crore and fiscal deficit is at ₹40,613.94 crore.
On the positive side, with the impact of the third wave of COVID-19 subsiding and lockdown restrictions lifted, the revenue should improve further. So far this fiscal, Tamil Nadu has borrowed ₹59,400 crore. The State budget for 2022-23 would show the exact fiscal position.
