RBI report: Bank funding via private placement route lowest in FY26

Funds raised by banks through private placements, qualified institutional placement and preferential allotment have decreased to their lowest over the last three financial years, the Reserve Bank of India's report on trend and progress of banking in India 2024-25 showed.

Up to November in the current financial year, funds raised by the public, private sector, and foreign banks were at ₹58,912 crore through 17 issuances, its lowest since FY23, according to provisional data from the Reserve Bank of India (RBI). This represents a sharp decline from the ₹1.49 trillion raised through 36 issues in FY25 and the ₹1.31 trillion raised via 40 offerings in FY24.

This reflects cautious balance sheet strategies amid tighter liquidity and evolving funding needs.

Public sector banks (PSBs) accounted for the bulk of funds raised in FY26, mobilising ₹40,719 crore through six issues, while private sector banks raised ₹18,192 crore through 11 issues. Foreign banks did not tap the private placement route during the period. In comparison, state-owned banks had raised ₹1.33 trillion in FY25, while private banks mobilised ₹16,419 crore that year.

“Resources raised by banks through private placement of debt, qualified institutional placement, and preferential allotment of equity in the capital market increased during 2024- 25. The increase was largely driven by PSBs, which recorded a growth of 36.6% in total amount raised through private placements, mostly through debt instruments,” the report said.

The slowdown reflects ample deposit accretion at select lenders, a reduced appetite for bond issuances due to higher yield levels and expectations of more supportive liquidity ahead. Banks had leaned heavily on private placements in recent years to shore up capital and meet regulatory requirements, particularly as credit growth outpaced deposit mobilisation.

The data also highlights a steady rise in private placement fundraising between FY23 and FY25. In FY23, banks raised a total of ₹1.23 trillion through 43 issues, followed by an increase to ₹1.31 trillion in FY24 and a further jump in FY25. The reversal in FY26 suggests that lenders are reassessing their funding mixes and relying on alternative funding resources.

Analysts believe that elevated government bond yields for the better part of FY26, coupled with uncertainty around the interest rate cycle, likely deterred issuers from locking in long-term funding. However, issuance activity could revive in the second half of FY26 if borrowing costs ease and credit demand remains robust.