Indian states set for record borrowing of 5 trillion rupees in final quarter

Indian states are expected to borrow a record 5 trillion rupees during the January to March quarter, according to a statement issued by the Reserve Bank of India on Friday.

Market participants had anticipated a heavy borrowing schedule for the final quarter of the financial year, after states raised a combined 7.13 trillion rupees through bond sales in the first three quarters.

If states proceed with the planned borrowing, it would mark the highest quarterly borrowing on record and push total annual borrowing to an all time high.

The increase in issuance comes at a time when demand for government bonds has weakened across segments. Analysts and traders expect the fresh supply to exert upward pressure on bond yields, particularly for longer duration debt.

A trader at a state run bank said that even if borrowing falls short of the announced amount, yields on both central and state government bonds are likely to rise.