Rating agency ICRA in its latest report has said that the borrowing cost for states continued to fall for the third week in a row, with the weighted average price falling to 7.44 per cent in the debt auction on February 27, 2024. The cost had remained at a two-year high throughout January sniffing at 7.8 per cent.
However, the report said the overall cost has been falling since the interim Union Budget, which forecast a lower than anticipated borrowing and a fiscal deficit target of 5.8 per cent for this fiscal and 5.1 per cent for the next financial year. The weighted average cut-off rate eased by 2 basis points to 7.44 per cent on February 27, 2024, with issuance trailing the indicated amount for the fifth consecutive week.
According to the report, twelve states raised Rs 32,800 crore through State Government Securities (SGS) on February 27 and the amount is 27 per cent lower than the highest-ever weekly auction of Rs 45,200 crore indicated for this week in the fourth quarter auction calendar. Both limited supply and the falling overall interest rates pulled down the weighted average cut-off to 7.44 per cent on February 27, 2024 from 7.46 per cent last week despite a mild increase in the weighted average tenor to 14 years from 13 years.
