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STATE DEVELOPEMENT LOANS

What are State Development Loans?

State Development Loans, or SDLs, as they are colloquially called, are issuances of the respective states in order to manage their own state finances. Generally, State Development Loans have the backing of the respective states and the consequent risk element associated in such investments depends on the fiscal health of the states.

What are the key features of State Development Loans?

  • The structure and nature of State Development Loans is broadly similar to that of a fixed rate Dated G-Sec. However, these instruments are generally issued for maturities up to 10 years, and in recent times many states have started issuing longer maturities based on their fiscal situation.
  • Reissuances of State Development Loans are extremely rare. In other words, generally, every SDL auction is an auction of a new SDL security and therefore, the auction process is yield based.
  • State Development Loans are traded at a spread above the benchmark G-Sec security. Liquidity of these securities is yet another factor that has a bearing on SDL valuation. However, investment in State Development Loans may be a good option for investors seeking to earn higher coupons.

How are State Development Loans traded in primary and secondary market?

Similar to Dated G-Sec, institutional players dominate this segment. Foreign capital flows too, have been permitted in State Development Loans. Non-competitive bidding is allowed in State Development Loans to the extent of 1% of the notified amount. The trading and settlement mechanism for State Development Loans remains the same as in case of Dated G-Sec.

Contact Us:

Clients interested in placing bids in Primary auctions and/or buying/selling SDL securities may contact our Sales Personnel on 022-66202224/25/28. We endeavour to provide the best possible returns to our clients, keeping in line with their overall investment objectives.

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