HYDERABAD: The Telangana government is making a smart move in raising the State Development Loans (SDL) by opting for 40-year tenure bonds. Normally, the States go for bonds with a ten-year tenure. All these years, Telangana had opted for 30-year bonds. But from January this year, it has been opting for 40-year bonds, whether it is a fresh loan or the reissue of the existing bonds.
In the last week of January, the TS bonds were reissued with an interest rate of 7.31 per cent, with a 40-year tenure. On January 14, the State raised Rs 2,000 crore SDL with a 40-year tenure with an attractive interest rate. According to officials, the long-tenor bonds would help the State in easing the debt burden.
Among all the States in the country, Telangana is the only one that issues securities with longer tenures, since 2016-17. But till recently, it issued bonds for 30-year tenure, which is the longest for the State government securities. However, from January onwards, the State broke its own record and has been going for 40-year bonds. The elongation of the maturity of the portfolio is a preferred strategy, the sources said.
The longest tenure bond issued by TS
The RBI, in its report ‘State Finances- A Study of Budgets of 2019-20’, also mentioned the ‘Elongation of Debt: Telangana Experience’. The report said, “Market borrowing by State governments in India mainly relies mostly on issuance of ten-year bonds. Since 2015-16, 15 State governments and the Union Territory of Puducherry have issued longer tenor securities. Among these States, the case of Telangana is instructive as the State has been issuing securities with longer tenors since 2016-17, with the longest tenor being 30 years, currently the longest tenor for State government securities”.