Banks raise Rs 91,500 cr in debt capital in FY23: ICRA

Mumbai: Amid tight liquidity condition, banks have issued a record quantum of bonds, with gross issuances hitting an all-time high of Rs 91,500 crore so far, this fiscal. They are likely to close the financial year with around Rs 1.4 lakh crore. Gross bond issuances by banks are estimated to reach Rs 1.3-1.4 lakh crore this fiscal as debt sales have already hit record high of Rs 0.915 lakh crore, surpassing the previous high of Rs 0.8 lakh crore in FY17, said ICRA Ratings in a note on Monday.

'This alternate resource of fund raising by banks is on the back of widening credit-deposit gap'

The agency said that this alternate resource of fund raising by banks is on the back of widening credit-deposit gap. With credit demand continuing to outdo deposits throughout this fiscal, the overall gap between deposits and credit growth widened substantially. Incremental credit expansion stood at Rs 12.7 lakh crore, while deposit accretion continued to trail at Rs 8.9 lakh crore, till December 16, 2022.

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Gross bond issuances by banks surged to Rs 0.9 lakh crore in the first nine months of FY23

To bridge this gap, banks have been relying on various sources of funding such as refinancing from financial institutions, drawdown of excess on-balance sheet liquidity and debt capital market issuances. As a result, gross bond issuances by banks surged to Rs 0.9 lakh crore in the first nine months of FY23, up from Rs 0.7 lakh crore in FY22, and surpassing the previous high of Rs 0.8 lakh crore in FY17, said Aashay Choksey, Vice-President and sector head, financial sector ratings at ICRA.

He expects the system-wide credit-to-deposit ratio to firm up to 76.3-76.5 percent by March from 74.8 percent as on December 16, 2022 and stand considerably higher than the low of 69.6 percent seen during the pandemic. Accordingly, the overall gross bond issuances by banks may rise to Rs 1.3-1.4 trillion in FY23.

Govt banks preferred tier-I bonds & pvt banks issued more of tier-II bonds

Tier I and II bonds qualify for inclusion in capital ratios besides shoring up growth capital for lenders and boost their liquidity coverage ratios and the net stable funding ratios. Banks also issue long-term infrastructure bonds to fund certain specified eligible assets. Both public and private banks issued infrastructure bonds, public banks had a higher preference for tier-I bonds while private banks issued more of tier-II bonds.

Within overall bond issuances of Rs 91,500 crore in the first three quarters of FY23, tier-II issuance reached an all-time high of Rs 47,200 crore.

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