The stock sale of five-year tenure has been notified. The stock would be sold through auction to be conducted by the Reserve Bank of India (RBI), Mumbai on February 23. The proceeds of the loan are to be utilised to finance capital outlay for creation of capital assets, said a government notification.
The state government has obtained the consent of the central government to raise this loan as required under Article 293 (3) of the Constitution.
The government stock up to 10 per cent of the notified amount of the sale will be alloted to eligible individuals and institutions subject to a maximum limit of one per cent of the notified amount for a single bid as per the Revised Scheme for Non-Competitive Bidding Facility in the auctions of the state government securities of the general notification.
Bids for the auction are to be submitted in electronic format on RBI's core banking solution (CBS) system- E-Kuber on February 23. RBI would display the auction results on the same day. Successful bidders are required to make payments on February 24.
The investment in government stock would be reckoned as an eligible investment in government securities by banks for the purpose of statutory liquidity ratio (SLR) under Section 24 of the Banking Regulation Act, 1949.
So far, the state government has raised Rs 4,000 crore from the open market.The state government had not resorted to market borrowing since 2006-07. But, resource crunch and an increased need to step up capital outlay had prompted the state government to take the Centre's nod to raise funds from the open market.
The overall borrowing target has been pegged at Rs 12,800 crore for this fiscal. The state's loan burden is expected to touch Rs 56,000 crore by the end of this fiscal. Still, it would be a comfortable 17 per cent of the state's Gross Domestic Product (GSDP) and in consonance with the state FRBM (Fiscal Responsibility and Budget Management) Act, 2005 which mandates debt stock within 25 per cent of the GSDP.