Indian Banks Issue Record Bonds Amid Tight Liquidity, Says ICRA

ICRA estimates gross bond issuances by Indian banks to be a record at around Rs 1.3-1.4 lakh crore for FY23.

<div class="paragraphs"><p>A man holding Indian rupee banknotes. (Photo: Usha Kunji/BQ Prime)</p></div>
A man holding Indian rupee banknotes. (Photo: Usha Kunji/BQ Prime)

Indian banks issued record bonds to part finance an uptick in credit demand amid tight liquidity in the banking system, according to ICRA Ltd.

Bonds issued by Indian banks have hit a record high of Rs 90,000 crore so far in the current fiscal year, ICRA said. The previous high was Rs 80,000 crore in fiscal 2017.

As such, the rating agency estimates the gross bond issuances by banks to be a record at around Rs 1.3–1.4 lakh crore for fiscal 2023.

"To bridge the gap emerging between deposits and credit growth as credit demand picked up, banks have been relying on various sources of funding, such as refinances from All India Financial Institutions, drawdowns of excess on-balance sheet liquidity, and debt capital market issuances," the agency said in a Jan. 6 note.

While both public and private banks issued infrastructure bonds, public-sector banks issued more Tier-I bonds and private banks issued more Tier-II bonds, ICRA said.

"Within overall bond issuances of Rs 91,500 crore in the first nine months of FY23, Tier-II issuance reached an all-time high of Rs 47,200 crore, albeit on the back of large issuances by two large private sector banks," the rating agency said. "We expect infrastructure bond issuances to reach an all-time high in FY2023."