Around 10 per cent of the bond issue has been reserved for non-competitive bidders, such as individuals and smaller institutions.
Despite continued financial pressure, the Punjab government led by Chief Minister Bhagwant Mann has decided to raise a fresh loan of Rs 1,000 crore by issuing 12-year Punjab Government bonds, according to a notification issued by the Finance Department on January 31.
The borrowing was carried out through an auction conducted by the Reserve Bank of India (RBI) on February 3, at a time when the state is facing high debt levels and ongoing cash-flow challenges.
Officials said the loan amount will be used to fund capital expenditure and ongoing development projects. Since Punjab has crossed its prescribed borrowing limits, the state obtained prior approval from the Union government, as required under Article 293(3) of the Constitution.
Repayment Scheduled in 2038
The government securities will have a tenure of 12 years, starting from February 4, 2026, with the principal amount to be repaid on February 4, 2038. The interest rate will be decided through an RBI auction process, and interest payments will be made twice a year.
Around 10 per cent of the bond issue has been reserved for non-competitive bidders, such as individuals and smaller institutions.
State Assets Used to Raise Funds
The borrowing is backed by Punjab Government Stock, effectively pledging state securities to raise immediate funds. Payments from successful bidders will be completed on February 4, and the bonds will qualify as Statutory Liquidity Ratio (SLR)-eligible investments, making them attractive to banks.
Growing Debt Concerns
Punjab has increasingly relied on market borrowings in recent years due to limited fiscal space. The state is among the most indebted in India, with outstanding liabilities running into several lakh crore rupees, raising concerns about long-term pressure on future budgets.
