Raising funds from bonds will lead to a decline in the CD ratio for private sector banks.
Banks will raise up to Rs 1.3 lakh crore by issuing bonds in FY25 due to slow deposit growth, a report by domestic rating agency Icra said. Amid a continuing gap between deposit and loan growth, bond issuance will be between Rs 1.2-1.3 lakh crore and will be the highest ever for the system, the report said. About 85 per cent of bond issuances will be by public sector banks, a report by domestic rating agency Icra said, according to a PTI report.
Banks had raised this much amount in FY 2024
According to the news, more interest for infra bonds among such lenders will drive the market. The agency said that tight liquidity conditions and loan growth consistently outpacing deposit growth have created a need for banks to raise funds from alternative sources. Banks raised Rs 1 lakh crore through bond issuance in FY24, while the previous all-time high was Rs 1.1 lakh crore in FY23.
Banks have so far raised Rs 76,700 crore from bonds
The report said that as mid-financial year approaches, banks have so far raised Rs 76,700 crore from bonds, a growth of over 225 per cent compared to the resources raised during the same period in FY24. As private banks are focusing on reducing their loan-to-deposit ratio, fundraising through bonds is dominated by public sector banks this year, the agency said.
Advance estimates of banks by June 30, 2024
Ratings head Sachin Sachdeva said raising funds from bonds will lead to a decline in the CD ratio for private sector banks, while public sector banks will continue to push growth through infrastructure bonds given the ample scope available. It said banks’ advances to the infrastructure sector are estimated at Rs 13-14 lakh crore by June 30, 2024, with public sector banks accounting for about 75 per cent.
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