Introduction to State Development Loans (SDLs)

What are State Development Loans (SDLs)?

State Development Loans (SDLs) represent debt instruments issued by state governments in India. They're primarily utilised to fund state development and infrastructure ventures. Here's a closer look:
  • Interest Rates: SDLs can have either fixed or floating interest rates.
  • Tenure: Their tenures range between 1 and 30 years.
  • Trading: SDLs are actively traded within the debt market.
  • Credit Ratings: The ratings of SDLs are contingent on the fiscal discipline and financial health of the issuing state.
  • Eligibility: They're suitable for banks' statutory liquidity ratio requirements, presenting lucrative investment avenues for various investor categories.
For instance, in March 2021, Tamil Nadu floated SDLs valued at Rs. 2,000 crore. With a 7-year tenure and a 6.95% coupon rate, they garnered considerable interest, getting oversubscribed by 2.6 times. Investors spanning banks, mutual funds, insurance firms, and provident funds eagerly bid. The funds raised were channelled into diverse state projects like urban development, road creation, water provisioning, and assorted social welfare initiatives.