State Development Loans:
Four states raised Rs 5,800 crore through state development loans (SDL) auction — about one-fourth of the amount 15 state governments intended to raise in the upcoming days.
- State Development Loans are dated securities issued by states for meeting their market borrowings requirements.
- Purpose is to meet the budgetary needs of state governments.
- The higher the fiscal strength of a state, the lower will be the interest rate (yield) it has to pay for the SDL borrowings.
- These are securities and they are auctioned by the RBI through the e-Kuber which is a dedicated electronic auction system for government securities and other instruments.
- Reserve Bank of India holds SDL auctions once a fortnight.
- The rate of interest or yield of SDL securities is determined through auction.
- The interest rate will be slightly higher than that of Central Government securities (G-secs) of matching tenure.
- The investors in SDL are basically commercial banks, mutual funds, and insurance companies that are attracted by the slightly higher interest