Twenty-eight state governments and three Union Territories (UTs) raised higher-than-expected Rs. 12.8 trillion state government securities (SGS) in FY2026, a sizeable 18.9% higher than the Rs. 10.7 trillion issued in FY2025. While the actual SGS issuances in FY2026 were ~5% below the indicated amount, this marks the lowest deviation since FY2022. The weighted average cut-off (WAC) of all state government securities (SGS) rose by 12 bps to 7.32% in FY2026 from 7.20% in FY2025, despite cumulative Repo rate cuts of 100 bps between April-December 2025. Factors that led to a hardening in the WAC included markets concerns about increase in supply of SGS due to adverse impact of GST rate rationalisation on revenues of states, weak demand for longer-tenor securities etc. The latter was reflected in a 20 bps increase in longer term securities to 7.42% in FY2026 from 7.22% in FY2025.

EXHIBIT: Trends in gross SGS issuance and YoY growth of all states/UTs

Source: RBI; ICRA Research