Tamil Nadu has so far raised ₹9,000 crore for fiscal 2021-2022 through market borrowings, according to data from Reserve Bank of India.
The state has indicated that it plans to borrow ₹23,450 crore during the first quarter of this fiscal (April-June 2021). This is less than the ₹28,000 crore borrowed in the first quarter of fiscal 2020-21. However, amid intense lockdowns to fight the second wave of COVID-19, states including Tamil Nadu have to borrow more, according to rating firms.
Tamil Nadu has been raising money through the issue of bonds, known as State Development Loans (SDLs). Interestingly, the State has raised ₹6,000 crore or nearly 66.7% of its total borrowings so far this year through long tenure bonds of 30 years or more.
On May 18, Tamil Nadu raised ₹1,500 crore each by issuing longer tenure bonds of 30-year and 35-years respectively, with the same cut-off interest of 6.96%.
On May 11, the state raised ₹3,000 crore through re-issue of bonds with tenure of 30 year and 35 years with cut-off interest of 6.93%.
Remaining, ₹3,000 crore was raised through issue of bonds with tenure of 10 years, with interest ranging from 6.75%-6.77%.
Tamil Nadu has announced an intense lockdown starting from Monday for a week.
According to rating agency ICRA, the issuance of SDL’s has shrunk by 45.8% to ₹48,200 crore in Q1 FY2022 (so far), from ₹89,000 crore in the same period last year. This was due an unexpected additional Central tax devolution of ₹45,000 crore released to states at the end of March, it added.
However, the ratings firm said if the restrictions are required to be continued, there may be a larger impact on the states’ revenue and borrowings from June 2021 onwards.
“Given the sharp resurgence in the pandemic, restrictions and lockdowns are expected to be in place for an extended period across regions. This would pose a setback for the revival of the region’s economy and could impact revenue collections of the government. The reliance of states on market borrowings is likely to continue in FY22 also,” another ratings firm CARE Ratings said.
