MUMBAI Mumbai: Led by public sector banks (PSBs), Indian banks are set to issue an all-time high bond of Rs 1.2 lakh crore to Rs 1.3 lakh crore in the current financial year (FY25), surpassing the previous peak of Rs 1.1 lakh crore in FY23, a report said on Tuesday. According to leading credit rating agency ICRA, PSBs’ share in bond issuance is likely to be 82-85 per cent, with infrastructure bonds dominating the segment. Banks have recently increased fund raising through bonds, even as the share of borrowings in total liabilities remains below pre-Covid levels. Tight liquidity conditions and credit growth continuing to outpace deposit growth have increased the need for banks to raise funds from alternative sources. Total bonds issued by banks for FY25 (till date) stood at Rs 767 billion, representing a 225 per cent increase over the previous year and reaching 75 per cent of total bonds issued in FY24. During FY15 to FY22, PSBs’ share in infrastructure bond issuance was negligible. Sachin Sachdeva, Vice President and Sector Head-Financial Sector Ratings, ICRA, said, “However, with better capital position, tight funding conditions and large infrastructure loan book, PSBs became dominant in infrastructure bond issuances and captured 77 per cent share in infrastructure bonds issuances by banks in FY23-FY25 (YTD).” Sachdeva added that this trend is expected to continue till FY25, with PSBs likely to account for 82-85 per cent of bank bond issuances in FY25 and infrastructure bonds expected to account for over two-thirds.
Additionally, the government’s continued focus on infrastructure spending, availability of large-scale infrastructure debt, which is eligible to be funded through these infrastructure bonds and strong demand for long-term issuances from insurance companies and provident funds, support these bond issuances. The report said that although as per the rules, their minimum period should be 7 years, but considering the preference of the investors, these have also been issued for relatively longer periods of 10 and 15 years.
