Bond issuances by banks are likely to decline to less than Rs 90,000 crore in 2023-24 (April-March) from the all-time high of Rs 1.1 trillion in 2022-23 as liquidity conditions ease.
“Stronger foreign portfolio investment inflows, in addition to the derecognition of the Rs 2,000 currency note and the dividend by the RBI could ease liquidity conditions in the interim,” credit rating agency ICRA said in a report on Wednesday.
Tier-I and additional tier-I bond issuances are expected to fall below the 2022-23 levels partly due to lower scheduled call options.
Public sector banks will remain larger issuers of tier-I bonds in the current financial year. Tier-I outstanding is expected to rise to Rs 1.3 trillion as of March 2024, from Rs 1.2 trillion in March 2023. Tier-II bond issuances are also expected to slightly moderate from their peak in 2022-23.
In 2022-23, banks increasingly relied on debt capital market issuances and refinance from financial institutions to shore up net lendable resources as the liquidity condition began to tighten.
As a result, combined issuances by banks and alternative investment funds touched a high of Rs 2.0 trillion in FY23, with gross bond issuances by banks reaching an all-time high of Rs 1.1 trillion.
While the overall credit growth momentum remains strong so far in 2023-24, the credit growth is expected to marginally moderate slightly in the current fiscal.