While Foreign Portfolio Investors (FPIs) have bought record amounts of Indian bonds this year — close to $16 billion — they are studiously staying away from state government loans. FPIs have used up just over 5% of the quota in SDLs (state development loans) of close to $4.4 billion or Rs 28,500 crore.“FPIs feel yields on SDLs are too fine for the credit risk on the states. Moreover, they tend to prefer the quasi-sovereign paper like that of NHAI which have yields almost in the same range,” Shashikant Rathi EVP and head, treasury, Axis Bank, points out.Nevertheless, even states whose finances appear weak, post-farm loan waivers, are able to borrow at relatively low yields. At the July 11 auction, Punjab picked up money at 7.34%, only slightly higher than Tamil Nadu’s 7.27%. In fact, Uttar Pradesh mopped up money at just 7.29%, only slightly higher than Maharashtra’s 7.22%; the western state boasts a GFD/GSDP ratio of 1.6%.