RBI bid to widen SDL market depth

To help deepen the secondary market for state government bonds, the Reserve Bank Wednesday introduced a facility allowing an existing investor to strip/reconstitute his/her holding in state development loans (SDLs) which normally have low liquidity. The central bank, as a debt manager to the states, has been making efforts to develop the SDL market in both primary and secondary segments.

"In continuation of these efforts, it has been decided to introduce the stripping/reconstitution facility for SDLs," the central bank said. This measure will be implemented in consultation with the respective states.

The RBI has also extended the scheme of non- competitive bidding and aggregators/facilitators to SDLs. States collectively borrow around Rs 4 trillion from the market to meet their revenue deficits per annum..