State Government Borrowing May Reach Rs 5.4 Trillion In Q4FY27: ICRA

(MENAFN- KNN India) New Delhi, Oct 6 (KNN) Gross state government securities (SGS) issuances in the fourth quarter of FY27 are projected at Rs 4.8-5.4 trillion, slightly below the Rs 5.2 trillion raised in Q4FY26, rating agency ICRA said in a report.

Net SGS issuances are estimated at Rs 3.4-4.0 trillion in Q4FY27, compared with Rs 4.0 trillion a year earlier. ICRA retained its full-year FY27 gross SGS issuance estimate at Rs 13.4-14.0 trillion, assuming states broadly adhere to their Q3 borrowing calendars.

The Reserve Bank of India has indicated gross state borrowing of Rs 3.6 trillion in Q3FY27, up 25.9 per cent from Rs 2.9 trillion in the year-ago quarter. After redemptions of Rs 1.3 trillion, net borrowing is estimated at Rs 2.3 trillion, up 26.8 per cent year-on-year.

Maharashtra, West Bengal and Haryana account for nearly 70 per cent of the additional Rs 742 billion borrowing planned for Q3. Their indicated incremental borrowings over Q3FY26 stand at Rs 198 billion, Rs 183 billion and Rs 135 billion, respectively.

BIS Adoption Supports Borrowing Visibility

ICRA said wider adoption of the Benchmark Issuance Strategy (BIS) could keep actual state borrowing broadly aligned with the indicative calendar, reported Business Standard.

Seven additional states and Union Territories adopted the framework in Q3, taking total participants to 26. These entities have indicated borrowings of Rs 2.8 trillion, accounting for around 77 per cent of planned Q3 issuance.

Previous trends show borrowing by BIS participants has largely matched indicated amounts. The initial nine participants raised Rs 3.31 trillion in H1FY27 against Rs 3.26 trillion indicated, while 10 states and UTs that joined in Q2 raised Rs 593 billion, or 92 per cent of the indicated Rs 641 billion.

Among major states outside the BIS framework, Tamil Nadu has indicated Q3 borrowing of Rs 480 billion, followed by Karnataka at Rs 200 billion and Gujarat at Rs 150 billion. ICRA expects their actual borrowing to remain broadly in line with the indicated calendar.

Q3 Borrowing Back-Loaded

The Q3 borrowing calendar is concentrated towards the end of the quarter, with states planning to raise Rs 1.06 trillion in October, Rs 1.14 trillion in November and Rs 1.4 trillion in December.

December alone accounts for nearly 39 per cent of planned Q3 issuance and will be spread across five weekly auctions.

ICRA estimates Q4 borrowing will account for around 36-38 per cent of full-year gross SGS issuance, below the 40-43 per cent share recorded over the previous three years.

However, the agency cautioned that Q4 borrowing could be higher if states fall short of their Q3 borrowing targets. State borrowing has remained heavily back-loaded in recent years, with around 40-41 per cent of annual borrowing concentrated in Q4 during FY23-FY26.

(KNN Bureau)

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