MUMBAI: Banks are scrambling to raise funds through corporate bonds as demand for credit picks up. Banks such as HDFC Bank, IDFC First Bank, Dhanlaxmi Bank, Punjab National Bank and Bank of Maharashtra will issue secondary bonds soon.
HDFC Bank issues largest bond among banks, raises funds ¥150 million through corporate bonds.On the other hand, IDFC First Bank plans to raise ¥15 crore, while PNB plans to raise ¥40 billion. Kotak Mahindra Bank plans to raise funds ¥15 crore through infrastructure bonds while SBI looks for ¥10,000 million.
Up to now, Union Bank of India has raised a total of ¥22 billion through the issuance of 15-year bonds and 10-year secondary bonds. The coupon rates on these bonds are fixed at 7.85% and 7.8%, respectively. Banks choose these long-term corporate bonds because they are more reasonable than 1-year corporate deposits currently fixed at 7.5-7.6%.
“After reporting good Q2 numbers and having raised perpetual bonds, banks now have room to raise secondary debt. With banking system credit growing at 17%, banks need minimum capital to finance that growth funds,” said Ajay Manglunia, managing director at JM Financial.
In recent months, credit has grown faster than deposits, and credit has grown twice as fast as deposits. According to RBI data, credit growth accelerated to 17.2% in the July-September quarter from 14.2% a quarter earlier, with total deposits rising 9.8% year-on-year in September 2022.
In the first half of this year, bank financing exceeded ¥$210 billion to fund credit growth through additional Tier 1 bonds. PNB recruitment ¥26.58 billion raised in two tranches through AT1 bonds while Canara Bank raises funds ¥40 million crore and SBI raised ¥68.72 million.
Get all industry news, banking news and updates on Live Mint. Download The Mint News App for daily market updates.
more less