States Borrowing cost remains high at 7.86% despite fall in G-secs yield

July 06, 2022
Current Context: Borrowing cost for the states continues to remain high, pegged at 7.9%.
States Borrowing cost remains high at 7.86% despite fall in G-secs yield
  • 9 States raised Rs 13,500 crore through state development loans at the first auction of the second quarter, which is nearly 4% higher than the indicated amount.
  • Gujarat accepted an additional Rs 500 crore while the remaining eight states borrowed in line with the amount indicated in the auction.
  • As per analysis overall issuance is 9.4% lower compared to the earlier year.
  • As of now 19 states raised Rs 1,23,700 crore which is nearly 22% lower compared to the earlier year.
  • In addition to that distribution between the G-secs and SDLs widened to 42 bps as the benchmark rates for the Centre declined to 7.39%.
  • This has happened due to recently levied cesses on domestic sales of crude and export of fuels and increased the import duty on gold.
  • The spread between the weighted average 10-year SDL and 10-year G-sec yield increased to 43 bps from 38 bps.

Question:

Q.1 As per ICRA analysis, borrowing cost for the states continues to remain at Which of the following percentage?
a. 6.2%
b. 7.9%
c. 8.2%
d. 7.4%

Free Exam Resources

Useful material to support your preparation, revision and exam planning.

Continue on BankExamsToday

Revise notes, practice questions and resume anytime.

Meet your mentor

From the Founder

Ramandeep Singh, founder of BankExamsToday

Ramandeep Singh

Banking Educator · Former Banker

Former banker and educator helping aspirants prepare for banking promotion and specialist officer exams with focused, practical guidance.

14+
Years' experience
5,000+
Selections
Ex-BoB
Banking experience