Are state guaranteed bonds really safe?

Despite the guarantee of the state government, these SOEs have defaulted in the past.

The default instances were primarily seen in the early 2000s when the following state-owned entities have defaulted on their bonds:-

1. Gujrat State Finance Corporation
2. Gujrat Industrial Investment
3. Orissa State Finance Corporation
4. Bihar State Financial Corporation
5. Bihar State Road Transport Corporation.
6. Bihar Electricity Board Corporation
7. Assam State Electricity Board
8. UP Financial Corporation
9. MP State Financial Corporation.
10. Madhya Pradesh State Electricity Board

A lot of state-owned enterprises (SOE) have, apart from bonds, also defaulted on their term loans taken from financial institutions.

Source: Default by the State-Owned Enterprises in India