"The total subscription aggregated Rs 2,817.01 crore out of which the excess subscription was refunded to applicants on the same day," an Reserve Bank of India release issued on Tuesday stated. The RBI had retained the entire oversubscription at the second tranche of state government loans held in October.

According to money market dealers, insurance firms, institutions and providend funds have made a beeline for the issue as it is offering an attractive yield of 12.50 per cent, 28 basis points higher than the 10-year central government loan auctioned at 12.22 per cent.

An advance tax outflow from the system to the tune of Rs 5,000 crore and the state loan auction saw call money rates rise to 10 per cent on Monday from 9-9.25 per cent last week in anticipation of theRBI retaining excess amounts from subscription to state loans. However the rates eased on Tuesday to close at 8.50 per cent, dealers said.

The RBI on December 21 announced the third tranche of market loans by 15 state governments worth Rs 1,612.06 crore. The 10-year paper carried a coupon of 12.50 per cent, 25 basis points higher than a similar maturity central government paper. The previous 10-year central government paper was floated at 12.25 per cent.

Fifteen Indian state governments have issued their third tranche of loans for an aggregate amount of Rs 1,612 crore. The loans maturing in 2008 will carry a coupon of 12.50 per cent.

Bihar, which borrowed the highest amount at Rs 321.44 crore, decided to reduce its budgeted borrowing by Rs 107.50 crore. With this cut, Karnataka has emerged as the highest borrower at Rs 299.60 crore followed by Uttar Pradesh at Rs 257.82 crore.

Other states slated to raise money are Uttar Pradesh (Rs 257.82 crore), Andhra Pradesh (Rs 150 crore), Rajasthan (Rs 134.03crore), Assam (Rs 60 crore), Goa (Rs 10.41 crore), Gujarat (Rs 70 crore), Himachal Pradesh (Rs 64 crore), Kerala (Rs 19.22 crore), Madhya Pradesh (Rs 51 crore), Maharashtra (Rs 51.46 crore), Orissa (Rs 98.58 crore), Tamil Nadu (Rs 51.34 crore) and West Bengal (Rs 80.60 crore).

According to an RBI release, the interest for the period from December 18, 1998, to April 11, 1999, will be paid on April 12, 1999, and thereafter interest will be paid half-yearly on October 12 and April 12 each year. The loan will be redeemable at par on October 12, 2008.

The second tranche of the state government loan carrying a coupon of 12.50 per cent held on October 11 was oversubscribed by 43 per cent. At the auction, the RBI received Rs 4,462.40 crore out of a notified amount of Rs 3,100.28 crore.