According to the report released by credit rating agency ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited), Gross bond issuances by Indian banks reached a record of Rs. 91,500 crores in the first 9 months (April-December) of financial year 2022-23 (FY23).
- In FY22, banks issued Rs. 70,000 crore in gross bond issuances. The previous record was Rs. 80,000 crore in FY17.
- Bank gross bond issuances are likely to reach Rs. 1.3-1.4 lakh crore by the end of FY23, as the banking system’s credit-to-deposit (CD) ratio continues to firm up.
This all-time high of Bank bond issuances is attributed to strong credit growth and tight liquidity conditions.
Click here to read more about ICRA’s analysis.
Key Statistics:
i.The incremental credit expansion amounted Rs. 12.7 lakh crore in FY23 (until December 16, 2022), while deposit accretion continued to trail at Rs. 8.9 lakh crore.
ii.The credit-deposit gap (after adjusting for Cash Reserve Ratio (CRR) /CLR requirements) widens to Rs. 5.7 lakh crore (as of December 2022).
iii.It is estimated that the banking system’s credit-to-deposit ratio will increase to 76.3%-76.5% by March 2023 from 74.8% on December 16, 2022, and will be significantly higher than the lows of 69.6% experienced during the COVID-19 pandemic.
iv.To bridge the credit-deposit gap (Rs. 3.8 lakh crore), banks have relied on a variety of funding sources, including refinancing from All India Financial Institutions (AIFIs), the drawdown of excess on-balance-sheet liquidity, and debt capital market issuances.
- Among AIFIs, Small Industries Development Bank of India (SIDBI) has witnessed a higher share of the incremental refinance demand from banks and non-banks.
Key Points:
i.According to ICRA, debt capital instruments like Tier-I and Tier-II bonds are eligible for inclusion in capital ratios in addition to backing lendable resources.
ii.Long-term infrastructure bonds are also issued by banks to fund certain eligible assets.
iii.Given that these debt instruments have a longer term, they also improve the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).
iv.While both public and private sector banks issued infrastructure bonds, public sector banks (PSBs) preferred Tier-I bonds more. The private banks issued more volumes of Tier-II bonds.
- According to ICRA’s analysis, Tier-II issuance for all bond issuances increased to an all-time high of Rs. 47,200 crore due to large issuances by two large private sector banks.
v.A study by CARE ratings found that term loans and other bank financing requirements accounted for nearly 60% of the bond issuances in December 2022.
Recent Related News:
In December 2022, Union Minister Nitin Gadkari, Ministry of Road Transport and Highways (MoRTH) launched India’s first–ever ‘Surety Bond Insurance’ product from Bajaj Allianz General Insurance Company to reduce the dependence of infrastructure developers on bank guarantees.
About Small Industries Development Bank of India (SIDBI):
Chairman & Managing Director (CMD)– Sivasubramanian Ramann
Establishment– 1990
Headquarters– Lucknow, Uttar Pradesh
