Surge in issuance by banks is partly fueled by comparatively low interest rates, said analysts
Surge in issuance by banks is partly fueled by comparatively low interest rates, said analysts

14-year low borrowing costs, spike in bond sales: Why it's a good time for banks

  • The banks have issued a total of 93 billion ($1.3 billion) of local-currency notes since Jan. 1, according to Bloomberg-compiled data
  • Falling borrowing costs and the spike in bond sales come as a relief to banks that are looking to strengthen their balance sheets, said ICRA

Rupee bond sales by Indian banks are off to the best start in five years as the lenders lured by record-low borrowing costs seek funds to bolster loans and capital buffers.

The banks have issued a total of 93 billion rupees ($1.3 billion) of local-currency notes since Jan. 1, according to Bloomberg-compiled data. That’s the highest amount at the start of a year since 2015 when they sold a record amount of bonds to meet Basel III requirements.

The nation’s prolonged credit crisis has investors, who are looking for alternatives to notes from loosely-regulated shadow lenders and riskier local companies, lapping up bank’s debt even as yields on it drop to lowest in at least 14 years. Falling borrowing costs and the spike in bond sales come as a relief to banks that are looking to strengthen their balance sheets and boost credit growth, according to a note by rater ICRA Ltd.

“Surge in issuance by banks is partly fueled by comparatively low interest rates and reasonable liquidity in India compared to yesteryears," said Kamal Mahajan, head of treasury and global markets at Bank of Baroda. The record sales will help lenders meet their “need for capital and asset-liability management for long-term assets."


This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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