States facing increasing redemption pressure as borrowings have zoomed

RBI report lauds Odisha, Haryana for dipping into own 'rainy funds' instead of borrowing more; views Gujarat, UP and Punjab as over-leveraged

States are forced to borrow more from the markets to meet increasing redemption pressure, which will more than double by 2026, according to the Reserve Bank of India’s (RBI) report on state finances. 

This has changed the way the states view their deficit financing and is increasing their borrowing cost as supplies increased.  

“Borrowing by states/Union Territories (UT)- gross and net - are fast catching up with those of the centre, with the drying up of all other sources of financing. The share of states’ market borrowing in general government borrowings has more than doubled in the last five years,