"The excess subscriptions received by some state governments will be retained," an RBI release issued on Tuesday stated.

According to the RBI sources, collecting agents for the state government bond in Mumbai alone have received more than 400 applications worth Rs 3,600 crore. The size of the issue was Rs 3,100.28 crore.

"A few states like Maharashtra and Gujarat have received more than the targeted amount and it is likely that a few subscribers will be asked to pick up the bonds of those states which have garnered much lower than the targeted amount," sources said.

According to sources, most banks, institutions and provident funds have made a beeline for the 10-year loan as it offers an attractive yield of 12.50 per cent, 28 basis points higherthan the 10-year central government bond which was auctioned at a coupon of 12.22 per cent.

According to sources, in Maharashtra alone, big institutional players like Life Insurance Corporation (LIC) and State Bank of India (SBI) have bid for an estimated Rs 1,000 crore and Rs 500 crore, respectively.

According to sources, most provident funds and public trusts have subscribed to state loans because of the attractive yield and are paying a good 28 basis points higher than the 10-year government of India securities.

Twenty-five state government are raising Rs 3,100.28 crore from the market through the primary issue. Bihar, which has pulled out from the list of states that raised the first tranche of the Rs 5,123.74-crore state loan on April 21, features among the states that will actively take part in the second tranche of the borrowing during the current fiscal. The gap between the coupon on centre and state loans has widened with the second tranche of the state loan.

Uttar Pradesh has accessed themarket with Rs 500 crore followed by Bihar at Rs 429 crore, Andhra Pradesh at Rs 400 crore, Rajasthan at Rs 300 crore, Orissa at Rs 200 crore.

The other states are Arunachal Pradesh at Rs 2.22 crore, Assam at Rs 100 crore, Goa at Rs 8.42 crore, Gujarat at Rs 135 crore, Haryana at Rs 84.28 crore, Himachal Pradesh at Rs 29.09 crore, Jammu & Kashmir at Rs 45.95 crore, Karnataka at Rs 70 crore, Kerala at Rs 120 crore, Madhya Pradesh at Rs 150 crore, Maharashtra at Rs 70 crore, Manipur at Rs 9.28 crore, Meghalaya at Rs 43.08 crore, Mezoram at Rs 14.97 crore, Nagaland at Rs 13.73 crore, Punjab at Rs 100 crore, Sikkim at Rs 24.90 crore, Tamil Nadu at Rs 80 crore, West Bengal at Rs 140 crore and Tripura at Rs 42.43 crore.