BUSINESS: Indian banks, led by public sector banks (PSBs), will issue bonds worth Rs 1.2-1.3 billion in the current financial year (FY25), according to a report released on Tuesday. This is higher than the previous high of Rs 1.1 billion. According to leading rating agency ICRA, bank funds are likely to account for 82-85% of bond issuance, with infrastructure bonds making a major contribution. Banks have recently increased their financing through bonds, although the share of loans in total loans remains below pre-Covid-19 levels. Limited liquidity and loan growth, which is outpacing deposit growth, increase the need for banks to obtain funds from alternative sources.
In FY25 (FY25), the total number of bonds issued by banks stood at Rs 7,670 crore, registering a growth of 225% year-on-year and accounting for 75% of total bond issuance in FY24. From FY15 to FY22, the share of public sector banks in infrastructure bond issuance was negligible. Sachin Sachdeva, vice-president and head, financial sector ratings, ICRA, said: “However, with improving capital position, tighter funding conditions and growing infrastructure loan portfolio, PSBs have become dominant in infrastructure bond issuance and accounting. We believe this trend will continue.” The target is to remain the same throughout the year.” The 2025-2023 period (year-to-date) contributed 77 per cent of bank infrastructure bond issuances in 2017. This trend is expected to continue till FY25, Sehadova said, adding that PSBs are expected to contribute 82-85% of bank bond issuances and infrastructure bonds will account for more than two-thirds in FY25. In addition, the government’s continued focus on infrastructure spending, availability of large infrastructure debt facilities that can be funded through these infrastructure bonds, strong demand for long-term issuances from insurance companies and hedge funds, according to the report, adding that the minimum holding period is set at seven years, but bonds can be issued for longer periods of 10 or 15 years, taking into account investor preferences. As of June 30, the banking sector’s penetration in the infrastructure sector is estimated at Rs 13-14 crore, with public sector broadcasters contributing Rs 16-17 crore. It is approximately 75%.
