Banks issued a record Rs 1.1 trillion bonds in FY23.
“However, stronger foreign institutional investor (FII)/foreign portfolio investment (FPI)inflows, as seen recently, in addition to the derecognition of the Rs. 2,000 currency note and an anticipated dividend by the Reserve Bank of India (RBI) could ease liquidity conditions in the interim. This could potentially drive down the overall bond issuances below Rs 900 billion from the peak in the previous year,” ICRA said.
Bank credit growth—it was 15 per cent in FY23—could moderate in FY24 though it will continue to outpace deposit growth. Deposits grew by 9.6 per cent in FY23.
“Accordingly, outstanding Tier-I bonds are expected to increase slightly to Rs. 1.3 trillion by March 2024 from Rs. 1.2 trillion as of March 2023,” it said.
Tier-II bond issuances are also expected to moderate from the peak level in FY2023 (Rs 49,600 crore), while some banks may still choose to raise infrastructure bonds, though this will largely be limited to a few banks, it said.