ICRA sees state borrowing at ₹4.8-5.4 trillion in fourth quarter of FY27 | Finance News

Assuming Q3FY27 issuances are broadly in line with the auction calendar, gross state government securities (SGS) issuances in Q4FY27 are projected at ₹4.8-5.4 trillion, compared with ₹5.2 trillion in Q4FY26. Net issuances in Q4FY27 are projected at ₹3.4-4.0 trillion, versus ₹4.0 trillion in Q4FY26, rating agency Icra said in a report.

Icra has retained its estimate for full-year gross state government securities (SGS) issuance at ₹13.4-14.0 trillion for FY27. The estimate assumes that states broadly adhere to the borrowing indicated in the auction calendar for the third quarter.

The Reserve Bank of India has indicated gross SGS borrowing of ₹3.6 trillion for Q3FY27, 25.9 per cent higher than the ₹2.9 trillion raised in the same quarter last year. After accounting for redemptions of ₹1.3 trillion, net borrowing is estimated at ₹2.3 trillion, up 26.8 per cent year-on-year.

The increase in Q3 borrowing is largely driven by Maharashtra, West Bengal and Haryana, which together account for nearly 70 per cent of the ₹742 billion incremental borrowing planned for the quarter. Maharashtra has indicated an additional ₹198 billion, West Bengal ₹183 billion and Haryana ₹135 billion over Q3 FY2026.

The increased adoption of the Benchmark Issuance Strategy (BIS) could also keep actual borrowing close to the indicated calendar, Icra said. Seven more states and Union Territories have adopted the framework in Q3, taking the total number of BIS participants to 26.

These 26 states and UTs have indicated borrowings of ₹2.8 trillion, or around 77 per cent of the total planned Q3 issuance. Recent borrowing trends suggest actual issuances by BIS participants are likely to remain broadly aligned with the indicated amounts, Icra said.

Icra noted that the initial nine BIS participants raised ₹3.31 trillion in H1 FY2027 against an indicated ₹3.26 trillion. The 10 states and UTs that joined the framework in Q2 raised ₹593 billion, or 92 per cent of the indicated ₹641 billion.

Among the major states outside the BIS framework, Tamil Nadu has indicated ₹480 billion of borrowing for Q3, followed by Karnataka at ₹200 billion and Gujarat at ₹150 billion. Icra expects actual borrowing by these states to also be broadly in line with the indicated amounts.

The Q3 borrowing calendar is also back-loaded, with states planning to raise ₹1.06 trillion in October, ₹1.14 trillion in November and ₹1.4 trillion in December. December borrowing will account for nearly 39 per cent of total Q3 issuance and will be spread across five weekly auctions.

The projected Q4 borrowing would account for around 36-38 per cent of Icra’s full-year gross SGS issuance estimate, somewhat lower than the 40-43 per cent seen in the previous three years. Icra said the lower share assumes Q3 borrowing remains in line with the indicative calendar.

However, if Q3 borrowing falls short of the indicated level, the Q4 borrowing calendar could be higher, Icra said. The agency also noted that state borrowing has remained heavily back-loaded in recent years, with around 40-41 per cent of annual borrowing concentrated in Q4 during FY23-FY26.