The Reserve Bank of India (RBI) on Friday extended its pilot Benchmark Issuance Strategy (BIS) for state government securities to 10 more jurisdictions, including nine states and the Union Territory of Delhi, while indicating that states and UTs are expected to raise ₹3.19 trillion through market borrowings during the July-September quarter of the current financial year, lower than market expectations of ₹3.4 trillion-Rs 3.5 trillion.
“The borrowing amount is lower than our estimate of ₹3.5 trillion,” said a dealer at a primary dealership. “This should have some positive impact, maybe 1-2 basis points of softening in the yield on the benchmark 10-year government bond,” the person added.
The BIS framework, introduced on a pilot basis in the first quarter of FY27 with nine states, involves issuing state development loans (SDLs) in pre-announced benchmark maturity buckets to improve transparency and provide greater clarity to investors. From the second quarter, the framework will also cover Delhi, Himachal Pradesh, Jharkhand, Manipur, Meghalaya, Odisha, Punjab, Sikkim, Uttarakhand and West Bengal, taking the total number of participating jurisdictions to 19.
These states will issue securities across pre-defined benchmark maturity buckets in line with a pre-announced borrowing calendar.
The move is aimed at reducing fragmentation in the SDL market by concentrating issuances in standardised tenors, thereby creating larger and more liquid benchmark securities. This is expected to enhance price discovery and provide investors with better visibility on supply.
“Expanding the benchmark issuance strategy should improve liquidity in select SDL tenors over time. As more states adopt the framework, pricing efficiency and investor participation are likely to improve,” said a dealer at a state-owned bank.
The RBI released an indicative borrowing calendar for the 18 states and Delhi that have adopted the framework, while a separate calendar was issued for the remaining states and Union Territories, which the central bank said are also expected to adopt the BIS going forward.
The central bank said the actual size of individual auctions and participating states would depend on borrowing requirements, approvals from the Centre under Article 293(3) of the Constitution, and prevailing market conditions. The RBI added that it may modify auction dates and amounts in consultation with the respective state governments and UTs.
The gross amount raised by states through state government securities (SGS) increased to ₹12.76 trillion in 2025-26 from ₹10.73 trillion in the previous year. The amount raised during the year as a percentage of total sanctions rose to 93.6 per cent from 91.4 per cent in 2024-25.
During 2025-26, 19 states or Union Territories availed themselves of the special drawing facility, with 11 of them resorting to Ways and Means Advances (WMA) and 10 using overdrafts on a few occasions.
The WMA limit for the Central government was fixed at ₹1.5 trillion for the first half and ₹0.5 trillion for the second half of 2025-26.