Reissue share in state bond issuances climbs to 7-year high of 18.5 pc in FY26

Mumbai, Mar 1 (PTI) The share of reissuances in total State Development Loan (SDL) borrowings rose to a seven-year high of 18.5 per cent in FY26, reflecting a sharp shift by states towards reopening existing securities amid elevated financing requirements.

According to the data compiled by PTI from Reserve Bank of India (RBI), states raised about Rs 1,90,970 crore through reissuances in FY26, out of total SDL issuances of around Rs 10,32,788.8 crore. The proportion is higher than 17.29 per cent recorded in FY20 and marks the highest level in at least seven financial years.

The reliance on reissuances has risen steadily over the past two years. In FY25, the share stood at 12.2 per cent, with states reissuing Rs 1,30,827.11 crore out of total borrowings of Rs 10,73,330.197 crore.

This compares with significantly lower levels in earlier years, 5.73 per cent in FY24 (Rs 56,300.01 crore of Rs 9,83,058.29 crore), 7.77 per cent in FY23 (Rs 58,948.517 crore of Rs 7,58,391.53 crore), 10.4 per cent in FY22 (Rs 72,925.748 crore of Rs 7,01,626.39 crore) and 9.72 per cent in FY21 (Rs 69,790 crore of Rs 7,17,811 crore), the data showed.

The sharp uptick comes at a time when state borrowings remain elevated.

According to a recent report by CARE Ratings, state governments' borrowing is estimated at Rs 12.5 trillion in FY26, up 16.6 per cent from Rs 10.7 trillion in FY25, reflecting sustained capital expenditure commitments and higher redemptions in the coming years.

The report also noted that the aggregate fiscal deficit of states is budgeted at 3.3 per cent of GSDP for FY26, while debt-to-GSDP levels remain sticky at around 28 per cent, above the pre-pandemic levels, keeping market borrowings through SDLs elevated.

Market participants said the increasing preference for reissuances reflects both liquidity management and cost considerations.

"Re-issuance of debt securities is an effective mechanism for consolidating outstanding debt and enhancing market liquidity by maintaining a limited number of ISINs. This is particularly important, as lower liquidity can adversely impact bond prices and result in higher yields, which is elevated already," said Mataprasad Pandey, Vice President at Arete Capital (Choice Group).

He added that reopening an existing security typically incurs lower issuance costs compared to launching a new ISIN, making it an efficient route for states managing large and recurring borrowing programmes.

With FY26's share surpassing the previous high seen in FY20, reissuances appear to be emerging again as a key tool in states' debt management strategy amid sustained fiscal pressures and elevated borrowing needs. PTI MSU AA HVA