What are SDLs?

• State Development Loans (SDLs) are market borrowings by state governments. The RBI issues these securities on their behalf, through auctions.
• Purpose of issuing State Development Loans is to meet the budgetary needs of state governments. 

• Each state is allowed to issue securities up to a certain limit each year. 
• SDLs are eligible securities for Statutory Liquidity Ratio (SLR) and Liquidity adjustment facility (LAF) purposes, and are bought by banks, insurance companies, mutual funds, provident funds and other institutional investors.
• In 2015, the Government allowed Foreign Portfolio Investors (FPIs) to buy SDLs up to 2% of outstanding SDLs in the market.

Why in News?

• Eleven States raised a total of ₹14,298 crore at the auction of State government securities or State development loans (SDLs) held recently.

Reference:

1. https://www.thehindu.com/business/borrowing-by-states-increase-45-this-fiscal/article32672219.ece